Japanese yen rises ahead of BoJ inflation

• BoJ Core CPI expected to remain unchanged at 3.4%
• US posts mixed PMI report

The Japanese yen has started the week in positive territory. In the European session, USD/JPY is trading at 148.87, down 0.39%.

Japanese yen eyes BoJ Core CPI

Japan’s core inflation rate has been moving higher. Last week, the nationwide core CPI rose to 2.9% for October, up from 2.8%. On Tuesday, we’ll get a look at BoJ Core CPI, which is one of the Bank of Japan’s preferred inflation gauge. The indicator has been steadily rising from a 2023 low of 2.7% back in February. The market consensus for October stands at 3.4%, unchanged from the September print.

Inflation has been above the BoJ’s target of 2% for months, raising speculation that the BoJ is planning to tighten policy and could even raise interest rates from -0.1% to zero early in 2024. Unlike the Federal Reserve, the BoJ is known to be very tight-lipped and investors shouldn’t expect any clear signals from the central bank about its future rate path.

The BoJ has insisted that although inflation has been persistently above target, it is not sustainable without substantial wage growth to drive domestic demand. There have been some subtle signals from the central bank that it will make a shift away from its ultra-loose policy, and inflation releases will play a key role in the BoJ’s decision at the next meeting on December 19.

The US ended the week with a mixed PMI report. Manufacturing PMI eased to 49.4, down from 50.0 and shy of the consensus estimate of 49.8. Manufacturing has posted mostly declines as the sector remains in a severe slump. The services sector is in better shape, with the PMI pointing to weak growth in the past few months. The PMI improved slightly to 50.8 in October, up from 50.6 a month earlier. On Thursday, the US releases ISM Manufacturing PMI, which is expected to post another decline.

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USD/JPY Technical

• USD/JPY is testing support at 148.88. Below, there is support at 147.74
• There is resistance at 149.95 and 150.61

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