Asian Market Update: Japanese GDP stronger than expected as personal consumption rebounds - Japanese GDP data was strong, but not strong enough to significantly boost expectations of a BoJ rate hike at the Feb 20/21 meeting. After bad weather weighed down personal consumption in Q3 data, there was a sharp rebound in the component during Q4 (personal consumption makes up about 55% of Japanese GDP). A strong rebound in personal consumption and a firm GDP reading was expected, but forex market reaction was exaggerated given extreme positioning against the JPY. Swap contract trading on overnight call rates shows that traders boosted expectations of a Feb 20/21 BoJ rate hike to 55% vs. the 40% priced in ahead of the GDP report. The weak yen seems to be doing the trick of growth for the Japanese economy. - Japanese government reacts to GDP data: As the market continues to doubt the independence of the Bank of Japan, the Japanese government was quick to react to the stronger than expected GDP data. Government spokesman Shiozaki said that he expects the BoJ to look at various pieces of data and not just GDP when deciding on rates. Shiozaki added that the government is always closely communicating with the BoJ, and that the BoJ should consider the government's view when deciding on monetary policy. Economy Minister Ota said that the GDP figures shows that personal spending remains sluggish. - GDP data confirmed firmness in the Japanese economy but were not strong enough to invite an imminent rate hike by the Bank of Japan, which would have had a negative impact on the stock market. The Nikkei climbed to its highest in nearly seven years as traders boosted stocks that benefit from domestic consumption improvement (retailers and department store chains), but property stocks saw profit taking on increased rate hike expectations. - Asian equity markets: The price of commodities, including copper and zinc, rose in London Metal Exchange, boosting resource related shares in Australia. Restructuring charges hit Telstra, as the company reported first-half profit fell 20%. Telstra now expects full-year earnings before interest and tax to grow 3% to 5%, up from its previous estimate of 2% to 4%. The ASX 200 was up 0.6% and Chinese equities all rallied. - Major forex: The USD remained under pressure during Asia after dovish comments from the Fed's Bernanke. Some suggest that the market is premature in starting to price in a Fed rate cut this year, given that the Fed left forecast for core PCE deflator was left unchanged. Bernanke's main message today was that the Fed will need to see more data before deciding what to do next with interest rates. Despite stronger than expected Japanese GDP data, USD/JPY could not push below 120.00. Upside for EUR/USD looks limited after the rally above cluster resistance around 1.3052. - Asian currencies: Easing inflation worries in the US and optimism on Japan's economy boosted S Korean exporters, as the KRW tracked gains in domestic equities. The HKD gained 0.06% against the USD and the KRW gained 0.23% against the USD. - Commodities: Gold and silver are consolidating at the moment, Gold's April future contract will need to break the $676-$680 zone to see further upside.