The USD/JPY and the GDP: How Will it Affect this Currency Pair?

The Gross Domestic Product (GDP) of a country refers to a country’s total economic output. The number reflects the total production, income and consumption from different sectors that include manufacturing, services, agriculture, mining, and numerous other areas. To get the most accurate result, population growth, inflation and deflation should ideally be considered in the total. For example, if the population growth increases proportionally to the increase in GDP levels, there obviously is no “real” growth in that country.

The GDP and Currency

With respect to GDP and a given country’s currency, generally if the GDP is higher, the currency increases in value as well. Thus, when looking at currency pairs, the GDPs of each country should be evaluated. In general, if there is a GDP growth pattern in one of the countries, then an investor should consider buying that specific currency as it is likely to grow in the coming years. However, of course, one should also conduct other research and make certain that this growth is sustainable.

The GDP of the US in 2013

In the United States, the economy grew faster in the second quarter than previously expected. Specifically, the US economy grew at a 2.5% rate which was higher than the 1.7% estimation. In comparison, the GDP for the first quarter was 1.1%. This increase was believed to occur because of an increase in trade and a higher overall demand for US goods and services.

The GDP of Japan in 2013

Meanwhile in Japan, the economy grew by 2.6% in the second quarter, but this total was below the previously estimated rate of 3.6%. Further, the GDP growth in the first quarter in Japan was 4.1%.

Will the Yen Increase in Value this Week?

Japan is expected to release a GDP report this week and these numbers are expected to increase. Specifically, the numbers are expected to state that the GDP grew to 3.9% - a significant increase over the previously reported 2.6% growth rate. Additionally, the Yen tends to be a preferred “safe haven” currency of sorts when there is an international conflict.

Thus, there is evidence that the Yen will turnaround in the near term.