USD/JPY rallies beyond 152.50 on speculation about Japan's stimulus

The US Dollar rallies for the fifth consecutive day against the Yen and hits fresh highs of 152.60
News reports about a USD 90 billion package in Japan are adding pressure on a weak Yen.
Later today, Japan's National CPI is expected to show that inflation accelerated in September.

Guillermo Alcala FXStreet

The US Dollar keeps heading north against a weaker Japanese Yen on Thursday. The pair appreciates for the fourth consecutive day, reaching two-week highs near 152.60 at the time of writing, as the market speculates with the introduction of a large stimulus program to boost the Japanese economy.

Reuters, citing a government document, reported on Thursday that Japan’s new cabinet is considering a USD 90 billion package to mitigate the impact of rising prices on households. This plan would come after a similar one approved last year and is expected to stress the country’s already strained public finances.

Concerns about Japan's public finances

The news has put additional pressure on a weak Japanese Yen, which is falling sharply since the nomination of the fiscal-dove Sanae Takaichi as the new prime minister. Takaichi, a former aide of former PM Shinzo Abe, is expected to boost government spending and hamper the Bank of Japan’s monetary tightening plans.

The US Dollar, on the other hand, remains moderately bid on Thursday as fresh trade frictions between the US and China have dampened risk appetite, increasing support for safe-havens. Greenback upside momentum, however, remains fragile ahead of the US CPI release, due on Friday. The sharp USD/JPY rally is mainly due to Yen weakness.

Later today, the Japanese Statistics Bureau will release September's national CPI, which is expected to show that inflationary pressures keep growing. This would endorse the BoJ's plans to keep raising interest rates and might provide some support to the Yen.

Economic Indicator

National Consumer Price Index (YoY)

Japan’s National Consumer Price Index (CPI), released by the Statistics Bureau of Japan on a monthly basis, measures the price fluctuation of goods and services purchased by households nationwide. The YoY reading compares prices in the reference month to the same month a year earlier. Generally, a high reading is seen as bullish for the Japanese Yen (JPY), while a low reading is seen as bearish.

Economic Indicator

National CPI ex Fresh Food (YoY)

Japan’s National Consumer Price Index (CPI), released by the Statistics Bureau of Japan on a monthly basis, measures the price fluctuation of goods and services purchased by households nationwide excluding fresh food, whose prices often fluctuate depending on the weather. The YoY reading compares prices in the reference month to the same month a year earlier. Generally, a high reading is seen as bullish for the Japanese Yen (JPY), while a low reading is seen as bearish.

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