Release Explanation: This report is a preliminary leading indicator of an economy’s health. Industrial production measures the volume of items produced in Japan’s mining and manufacturing industries and tends to react quickly to the ups and downs in the business cycle. For these reasons industrial production is considered a reliable leading indicator that conveys information about the overall health of the Japanese economy.
Trade Desk Thoughts: Industrial production for January plummeted to a new low for a third consecutive month. The report indicates that production has fallen by 10.0 percent from one month earlier. This indicates that more layoffs are on the way as companies struggle to decrease costs. The contraction seen in Japan over the last quarter is the worst since the 1974 oil crisis. Growth is expected to shrink by 4 percent in the coming year. Japan is very susceptible to the recession because of its strong exports, but with the U.S. (Japans largest trading partner) pulling back it has had a negative effect on the economy.
Forex Technical Reaction: The yen has fallen approximately 50 pips from the high of the previous day and is currently finding support just above the neutral pivot point.