3 December 2024 – Japan’s economy is in good spirits and on the road to recovery, as the latest industrial and retail data show. And Dalian iron ore futures reach two-month high on stimulus optimism and steelmaker restocking.
Japan’s economy recovering: industry and retail trade surprise positively
The Japanese economy is sending out strong signals of recovery. In October, both industrial production and retail sales increased by 1.6 per cent compared to the previous year. These encouraging figures are giving the yen an additional tailwind: on Friday, the Japanese currency gained around one per cent in value against the US dollar and the euro.
Central bank’s two per cent target within reach
Inflation data also underlines the upward trend in the economy. In the greater Tokyo area, the annual inflation rate rose to 2.6 per cent in November. Particularly noteworthy is the Bank of Japan’s preferred inflation measure excluding fresh food and energy, which climbed to 1.9 per cent. This brings the central bank’s two per cent target within reach. These developments could encourage the monetary authorities in their cautious course of gradually normalising monetary policy.
Market observers expect a slight increase in the key interest rate
Market observers expect the key interest rate to be raised from 0.25 to 0.35 per cent at the upcoming meeting on 19 December. Further steps towards the one per cent mark are expected by the end of 2025, which is likely to give the yen additional strength.
Dalian iron ore futures reach two-month high on stimulus optimism and restocking
Dalian iron ore futures extended their rally for a third consecutive session on Tuesday, climbing to their highest levels in nearly two months. The surge is propelled by expectations of additional economic stimulus measures and seasonal restocking activities by Chinese steelmakers, reinforcing China’s position as the world’s leading iron ore consumer. Iron ore prices also continued to improve on the Singapore Exchange on Tuesday.
Market analysts note that traders are closely watching upcoming meetings of Beijing’s top leadership for hints of new stimulus policies aimed at bolstering economic growth. The anticipation of potential government support is fueling positive sentiment across commodity markets.
“Increased restocking from steel mills ahead of the winter season is also providing a lift to iron ore prices,” said a market strategist. “Steel producers are replenishing their inventories to ensure steady production, which boosts demand for iron ore.”
Upbeat mood spilled over into the steel market
The upbeat mood spilled over into the steel market, with most benchmarks on the Shanghai Futures Exchange posting gains. Rebar prices edged up 0.51%, hot-rolled coil advanced 0.86%, and wire rod rose 0.47%, reflecting overall strength in the steel sector.
The combination of policy optimism and robust industrial activity suggests that iron ore prices may continue to find support in the near term, barring any unexpected shifts in market dynamics.
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