Tokyo inflation lower than expected, Yen extends losses
|The Japanese yen is down for a second straight day. In the European session, USD/JPY is trading at 147.87, up 0.60% on the day. The yen climbed 1.2% early in the week but has reversed directions and pared most of these gains.
Tokyo Core CPI falls to 2.9%
Tokyo Core CPI, which excludes fresh food, rose 2.9% y/y in July, down from 3.1% in June and below the consensus of 3.0%. Tokyo Core CPI has slowed for a second straight month but still remains well above the Bank of Japan's target of 2%. The driver behind the deceleration was lower costs for energy, water and rice. Still, food prices, especially rice, have been soaring and disgruntled voters punished the government in the recent election, depriving it of a majority in parliament.
The so-called "core-core CPI", which excludes fresh food and fuel and is closely monitored by the BoJ, remained unchanged at 3.1% and matching the consensus. The BoJ wants to see sustainable underlying inflation and this strong reading is encouraging.
BoJ expected to hold rates next week
The BoJ meets next week and is widely expected to consider its wait-and-see stance. The central bank hasn't raised rates since January, as US President Trump's tariffs stifled any hopes that that the BoJ would gradually raise rates in the first half of the year.
This week's announcement that the US and Japan had reached a trade deal has raised expectations that the BoJ will hike rates before the end of the year. Deputy Governor Shinichi Uchida said that the trade deal removed uncertainty and raised the likelihood that inflation would remain sustainable at 2%, a prerequisite for further rate hikes.
The BoJ isn't likely to change any policy settings at the upcoming meeting, but will provide an updated quarterly report which will likely refer to the US-Japan agreement. The BoJ could revise upwards its inflation forecast, which would raise expectation of a rate hike in the coming months.
USD/JPY Technical
- USD/JPY has pushed above resistance at 147.12 and 147.47. Above, 148.11 is under pressure.
- 146.48 and 146.13 are the next support levels.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.