Underlying sentiment will remain very weak in the short term as the economy collapses, but there is the potential for a further limited correction stronger after recent heavy losses.

As yen sentiment remained substantially weaker, the yen came under further pressure in US trading on Thursday with the dollar pushing to a high above 98.50 before a partial retreat.

The Japanese data remained grim with industrial production falling by a record 10% for January following a 9.8% decline the previous month as industry remained under severe pressure. Core consumer prices were unchanged over the year while household spending fell 5.9% over the year.

Although extremely weak, the data was no worse than expected and the yen avoided further selling pressure following the data. There was also evidence of month-end dollar selling which helped trigger a partial yen correction and the Japanese currency is still over-sold technically after recent heavy losses.

Underlying confidence is still liable to be weak in the short term with the yen still finding it much more difficult to secure any defensive support with the dollar consolidating below 98 in early Europe on Friday.