The Japanese yen rose by 0.1% against major currencies in early trade on Monday. The currency was buoyed by some safe haven demand as investors looked for a safe place to park their funds amid rising uncertainty in the global markets. The yen, which is considered a safe haven currency due to its low volatility and stability, typically gains during times of market turmoil.
The yen’s gains were also supported by data released on Monday which showed that Japan’s service sector activity grew at a record pace in April. The Nikkei Japan Services Purchasing Managers’ Index (PMI) rose to 62.2 in April, the highest level since the survey began in 2007. The data suggests that Japan’s service sector is showing some resilience despite the challenges posed by the COVID-19 pandemic.
Record Service Sector Growth Points to Resilience in Japan’s Economy
The record growth in Japan’s service sector is a positive sign for Asia’s second-largest economy, which has struggled to recover from the pandemic. The country’s economy shrank by 4.8% in 2020, the largest contraction since World War II. However, the latest data suggests that the service sector, which accounts for around two-thirds of Japan’s economy, is showing signs of strength.
The record growth in the service sector was driven by an increase in new orders, which rose at the fastest pace in over a decade. The survey also showed that employment in the service sector increased for the first time in over a year, indicating that companies are beginning to hire again.
Despite the positive data, Japan’s economy still faces several challenges. The country is currently grappling with a resurgence in COVID-19 cases, which has prompted the government to declare a state of emergency in several prefectures. The state of emergency has led to a decline in consumer spending and could slow down the recovery of the service sector.
In conclusion, the Japanese yen rose on Monday due to safe haven demand as investors sought refuge amid rising uncertainty in the global markets. The currency was also supported by data which showed that Japan’s service sector grew at a record pace in April, indicating some resilience in Asia’s second-largest economy. While the latest data is positive, Japan’s economy still faces several challenges, including a resurgence in COVID-19 cases and a decline in consumer spending.