USD/JPY Jumps to 142, Bank of Japan’s Core CPI Next

11/21/2022

1 minute read

2022.11.21 14:41

MarketPulse

The Japanese yen is getting pummeled at the start of the trading week. In the North American session, is trading at 141.90, up 1.09%.

Will BoJ Core CPI Continue its Upswing?

Japan releases , the Bank of Japan’s preferred inflation indicator later today. The indicator has accelerated for eight consecutive months, as inflation continues to move higher. , released last week came in at 3.6%, up from 3.0%. A higher-than-expected reading is unlikely to lead to any change in policy at the BoJ. Governor Kuroda has insisted that inflation is temporary and should peak around 3%.

The bank’s uncompromising stance, which has capped interest rates on Japanese government bonds, has resulted in the yen sliding about 20% against the dollar this year. Rather than stem the yen’s decline with interest rate hikes, the government has responded with massive currency interventions. Such unilateral moves are unlikely to have a lasting effect, with the Fed still aggressively raising rates and the US/Japan rate differential only getting wider.

Federal Reserve members have been delivering hawkish messages to the markets, in a coordinated response to the rash exuberance in the markets following the US report. The Fed speak campaign has dampened risk appetite and dashed hopes of a Fed U-turn on rate policy, which has helped the dollar recover some of its recent losses. The Fed has long insisted that one or two reports showing weaker inflation is not proof of a trend, although the markets have gone in a tizzy whenever inflation has softened. The markets have priced in a 50-bp hike next month, although some Fed members have stated that a 75-bp move remains on the table.