Yen edges lower, eyes on Tokyo core CPI

It has been a quiet week for the Japanese yen, but USD/JPY is showing some strength on Thursday and has pushed above the 137 line for the first time this year.

Will Tokyo Core CPI continue to rise?

Japan’s inflation indicators have continued to point upwards. We’ll get a look at Tokyo Core CPI for February later today. This key indicator has accelerated for eight straight months and hit 4.3% in December, its highest level since May 1981. The upward trend is expected to continue, with an estimate of 4.5%. A reading below expectations would not be a total surprise, as the government fuel subsidies took effect in February and could be reflected in the inflation release.

These inflation levels may be the envy of other developed countries, but they are causing serious distress in Japan, which had a deflation problem for decades. The Bank of Japan has insisted that inflation is transient, an echo of what the Fed and ECB were preaching before they threw in the towel and hiked rates in a massive fashion. As inflation continues to rise, there is growing pressure on the BoJ to ease up on its ultra-loose policy.

The BoJ, which has its hands full with rising inflation, is in the midst of a sensitive leadership transition. Kazuo Ueda will take over from Haruhiko Kuroda next month. Ueda has stressed continuity at his confirmation hearings, saying that the central bank’s current policy is appropriate. Nevertheless, the markets aren’t convinced that Ueda will take his time before making any changes in policy. The Bank’s yield curve control policy has damaged the bond markets and there is concern that if Ueda stands on the sidelines at the April meeting, the result could be a massive selling of bonds. Just to add to the drama, there is speculation that Kuroda could tweak policy at his final policy meeting on March 10 in order to relieve the pressure on Ueda.

.

USD/JPY Technical

• There is resistance at 137.37 and 138.24
• 135.65 and 134.78 are providing support

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.