Richard Koo, Chief Economist at Nomura, suggests that recently we have seen clear signs of a slowdown in the US, which has the greatest bearing on Japan’s exchange rate. Key Quotes “The official statement from the January 27 FOMC meeting starts out with an admission that US economic growth “slowed late last year.” Real GDP grew only 0.7% q-q annualized in 2015 Q4, off sharply from the Q3 result. It is quite possible that this slowdown was partly responsible for the yen’s ascent against the dollar over the last few weeks. The latest edition of the Fed’s Beige Book survey of regional economic conditions also contains far more indications of weakness than the previous report, with expressions such as “mixed” and “flat” appearing more often. In particular, roughly half the districts in the survey reported a decline in manufacturing output as a result of the strong dollar. Exporters of agricultural products also said they are suffering from the strong currency. To the extent that a significant part of US manufacturing is tied to the energy sector, the sharp decline in oil prices has triggered a severe slump. No signs of pick-up in wages or prices: Prices and wages, meanwhile, remain relatively stable, and while many districts reported labor market tightness, only two of the twelve—New York and San Francisco—reported a pick-up in wage inflation. Prices are seen as being almost unchanged as a result of the strong dollar and falling prices for energy and other commodities. Bumper harvests of certain crops have also helped depress prices. While inflation in wages and general prices has not picked up significantly, real estate prices continue to rise briskly in many districts, and have trended firmly in spite of significant volatility in global stock markets over the last six months.” For more information, read our latest forex news.