Japanese Yen Steady Ahead of CPI

12/23/2022

1 minute read

2022.12.23 00:48

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MarketPulse

The Japanese yen edged higher on Thursday. In the European session, is trading at 132.09, down 0.27%.

The dust has settled after Tuesday’s dramatic events when the yen shot up 3.7%. This followed the Bank of Japan’s shocking announcement that it would widen its yield curve control on bonds from 25 bp to 50 bp. The markets were completely blindsided, which could very well be what the BoJ hoped for.

The markets hadn’t expected any policy moves until after BoJ Governor Kuroda ended his term in April. Still, there is talk of major policy moves before then, such as raising interest rates out of the negative territory. The BoJ releases minutes later today, but these are minutes of the November meeting. Still, with all the drama that the BoJ has produced this week, investors will keep an eye on this release, looking for clues about future policy.

National Core CPI next

What will be of more interest to the markets is for November, which will also be released later today. The index is expected to inch up to 3.7%, up from 3.6% in October. Japan’s rate is much lower than the US or the UK. Still, price pressures have nonetheless put the squeeze on households and businesses, which have become accustomed to decades of deflation.

With economic conditions improving and inflation rising, there has been speculation that the BoJ might consider major policy moves in the short term, such as exiting from its stimulus program. The BoJ showed that it was willing to make significant moves this week, and more tightening could be on the way.