Yen Steady After Core Inflation Comes in as Expected

12/23/2022

2 minutes read

2022.12.23 11:09

The dust is settling after the Bank of Japan’s stunning move earlier this week. At its policy meeting, the BoJ widened the yield curve on long-term bonds from 0.25% to 0.50%.

The move blindsided the markets, which had anticipated a ho-hum BoJ meeting with no changes in policy. The announcement sent the tumbling by over 500 points and has raised speculation that the BOJ could make further changes before BOJ Governor Kuroda wraps up his term in April.

The yen has since settled down, and the markets are keeping an eye on other releases. for November delivered as expected, as the 3.7% gain matched the consensus and ticked up from 3.6% in October. The BoJ also released meeting minutes, but these were from the October meeting.

Some members voiced concern about the strong descent of the yen, saying it caused uncertainty and had many negative effects on the economy. It should be kept in mind that the yen was much weaker in October when these comments were made, but it does indicate that the yen’s strength is of concern to the BOJ.

Another interesting comment was that the bank needed to assess how the markets would react if the BoJ decided to exit its easy policy. After this week’s yield curve move, this point takes on added urgency, with rising speculation that the BoJ could tighten policy in the near term.

Markets eye PCE Core Index

In the US, there are a host of events today. The markets will pay particular attention to the PCE Core Index, the Fed’s preferred interest indicator. The is expected to slow to 4.6% y/y in November, down from 5.0% a month earlier.

and are also expected to soften. The US also releases , UoM , and UoM . Investors will be paying close attention to the inflation and inflation expectation releases.

The US posted strong numbers on Thursday. rose to 216,000, up from 214,000, investors liked that the reading was lower than the consensus of 222,000.

Also, for Q3 was revised upwards to 3.2%, up from 2.9% in the initial estimate. The solid data indicates that the economy is well-positioned to handle additional rate hikes, which the Fed has promised as it battles inflation.