Created
: 2024.08.23
2024.08.23 09:55
The USD/JPY pair trades on a weaker note near 146.20 during the early Asian session on Friday. The Japanese Yen (JPY) edges higher after the release of National Consumer Price Index (CPI) inflation data and the Bank of Japan's (BoJ) Governor Kazuo Ueda's speech. Traders will closely watch US Federal Reserve (Fed) Chair Jerome Powell's speech at the Jackson Hole Symposium later on Friday.
Data released by the Japan Statistics Bureau on Friday revealed that the country's headline National CPI climbed 2.8% YoY in July, compared to 2.8% in June. Meanwhile, Core inflation, which strips out prices of fresh food, came in at 2.7% YoY in the same report period versus 2.6% prior, This figure was in line with the market expectation and may have revitalized the BoJ's interest rate-hike case, which lifts the JPY against its rivals
The so-called "core-core" inflation rate, which strips out prices of both fresh food and energy, fell to 1.9% YoY in July from 2.2% in June. This figure registered the lowest level since September 2022.
Additionally, the hawkish comments from BoJ's Governor Ueda boost the JPY broadly. The BoJ Governor Kazuo Ueda said on Friday that the Japanese economy is moving in line with price target protections, adding that he will closely watch the market moves with a sense of urgency as uncertainties remain.
On the other hand, markets expect the Fed to begin easing policy in its September meeting. Minutes released on Wednesday indicated that the majority of Fed members support a rate cut in the upcoming meeting next month. Investors are now pricing in around 76% odds of a 25 basis points (bps) Fed rate cut in its September meeting, according to the CME FedWatch Tool. Markets see a full percentage point worth of rate cuts anticipated by the end of this year.
On Thursday, Federal Reserve Bank of Boston President Susan Collins stated that it will soon be appropriate to begin cutting rates, adding that incoming data will guide the pace of rate cuts. Kansas City Fed President Jeff Schmid noted Thursday that he was looking more closely at the dynamics behind the increase in the unemployment rate and would let data guide his decision on whether to support a rate reduction next month. The attention will shift to the the Fed's Powell speech later on Friday, which could give some hints about the US interest rate path.
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan has embarked in an ultra-loose monetary policy since 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank's policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds.
The Bank's massive stimulus has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ's policy of holding down rates has led to a widening differential with other currencies, dragging down the value of the Yen.
A weaker Yen and the spike in global energy prices have led to an increase in Japanese inflation, which has exceeded the BoJ's 2% target. With wage inflation becoming a cause of concern, the BoJ looks to move away from ultra loose policy, while trying to avoid slowing the activity too much.
Created
: 2024.08.23
Last updated
: 2024.08.23
FXStreet is a forex information website, delivering market analysis and news articles 24/7.
It features a number of articles contributed by well-known analysts, in addition to the ones by its editorial team.
Founded in 2000 by Francesc Riverola, a Spanish economist, it has grown to become a world-renowned information website.
We hope you find this article useful. Any comments or suggestions will be greatly appreciated.
We are also looking for writers with extensive experience in forex and crypto to join us.
please contact us at [email protected].
Disclaimer:
All information and content provided on this website is provided for informational purposes only and is not intended to solicit any investment. Although all efforts are made in order to ensure that the information is correct, no guarantee is provided for the accuracy of any content on this website. Any decision made shall be the responsibility of the investor and Myforex does not take any responsibility whatsoever regarding the use of any information provided herein.
The content provided on this website belongs to Myforex and, where stated, the relevant licensors. All rights are reserved by Myforex and the relevant licensors, and no content of this website, whether in full or in part, shall be copied or displayed elsewhere without the explicit written permission of the relevant copyright holder. If you wish to use any part of the content provided on this website, please ensure that you contact Myforex.
Myforex uses cookies to improve the convenience and functionality of this website. This website may include cookies not only by us but also by third parties (advertisers, log analysts, etc.) for the purpose of tracking the activities of users. Cookie policy