Japan’s economy shrank slightly more than initially thought in the April-June quarter, official data released Tuesday showed, deepening a contraction that was already the worst in the nation’s modern history. The world’s third-largest economy shrank 7.9% in the second quarter of this year from the previous quarter, more than the initial 7.8% in the preliminary data, the Cabinet Office said.

The downward revision comes with corporate investment weaker than in the preliminary data released last month, as the corona virus deepens the country’s economic woes. The latest headline figure was modestly better than the market consensus of an 8.0% contraction, but it is the worst figure for Japan since comparable data became available in 1980, beyond the brutal impact of the 2008 global financial crisis.

Labour ministry data showed inflation-adjusted real wages, a key gauge of households’ purchasing power, declined 1.6% in July from a year earlier, following a downwardly revised 2.1% drop the previous month.

Overtime pay dropped 16.6% in July from a year earlier, down for the 11th straight month, while nominal total cash earnings dropped 1.3% in the year to July. Regular pay – or base salary, which makes up most of the total cash earnings – saw a modest increase, growing 0.3%, which was smaller than June’s downwardly revised 0.4% gain.

The market mood remains mostly sluggish amid the escalating tension between the US and China, as well as the recent border tussle among New Delhi and Beijing. Though, hopes of further stimulus from the US keep, followed by Friday’s upbeat data favor the greenback bulls.

It’s worth mentioning that the calls of a snap election in Japan, other than the PM leadership vote scheduled next week, also weigh on the market’s risk-tone sentiment.

USD/JPY 4 Hour Chart:

Support: 106.10 (S1), 105.99 (S2), 105.85 (S3).

Resistance: 106.36 (R1), 106.49 (R2), 106.61 (R3).

In the prevailing market sentiment creating an unfavorable impact on yen, we expect a bullish trend for USD/JPY.