The Japanese yen is showing little movement on Christmas Day. Japanese markets are open but with most global markets closed for the holiday, the currency markets will be very quiet today. In the European session, USD/JPY is trading at 157.29, up 0.08% on the day.
Corporate service inflation hits 3%
Japanese inflation indicators have been heading higher and the upswing was repeated on Wednesday as Japan’s corporate service price index (CSPI) climbed 3.0% in November. This marked a second straight month that CSPI has accelerated, after a 2.9% gain in October.
CSPI measures the price that companies charge each other for services and is a leading indicator of service-sector inflation, which is closely watched by the Bank of Japan. The rise in CSPI supports the case that wages are rising and businesses are passing higher costs to consumers. This increase in demand-driven inflation is exactly what the BoJ wants to see before raising interest rates.
The BoJ has hinted that further rate hikes are coming but hasn’t provided any hints about the timing. There were some expectations of a rate hike at last week’s meeting but the central bank stayed on the sidelines and Governor Ueda sounded dovish, saying that inflation was increasing “at a moderate rate” and the BoJ could take its time raising rates.
Is Ueda throwing up a smoke screen to keep speculators away when the BoJ is in fact planning a rate hike in the next month or two? Perhaps. Inflation has been trending higher and the yen is falling fast, plunging 9.5% since Oct. 1. The yen pushed past the symbolic 160 level in July and could do so again. If the BoJ is genuinely concerned with the rapid descent of the yen, it will have to consider a rate hike or take more extreme action and intervene in the currency markets to prop up the ailing yen.
USD/JPY Technical
- There is resistance at 157.41 and 157.66
- USD/JPY tested support at 157.15 and 156.90 earlier. Below, there is support at 156.64
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.
