Japanese Yen (JPY) Analysis

• Japanese CPI mostly positive for the Bank of Japan
• JPY continues its steady decline to levels last seen before April FX intervention
• 10-year JGB yields head higher but have no effect on the yen
• The analysis in this article makes use ofchart patterns and keysupport and resistance levels. For more information visit our comprehensiveeducation library

Japanese CPI Mostly Positive for the Bank of Japan

12-month Japanese CPI for May came in above the prior 2.5%, at 2.8% while core CPI (CPI excluding fresh food) narrowly missed expectations of 2.6% to print at 2.5%. The measure that excludes fresh food an energy, known as ‘core core inflation’, saw a decline from 2.4% to 2.1%.

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The Bank of Japan (BoJ) still requires convincing to hike rates again this year after calling for a virtuous relationship between inflation and wages. Demand-driven inflation as opposed to supply-led price pressures is also a key differentiator when it comes to BoJ thinking around inflation. The drop in ‘core core’ suggests non-volatile measures of inflation are losing momentum at a time when the local economy appears to be contracting (Q1 GDP measured -0.5% on a quarter-on-quarter basis). Thus the BoJ will require more data before gaining the necessary confidence to hike the interest rate again.

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