The greenback remained range bound against the yen following reports of weak economic data from both the US and Japan. While Japan’s household spending unexpectedly declined in November, the US NFIB small business optimism index missed estimates. Overall, the USD/JPY pair remained range bound between 131.40 and 132.22 in the last 24 hours.
According to Japan’s Statistics Bureau, the country’s household spending fell by 1.20% y-o-y in November, following a 1.20% growth in October, which disappointed economists who were expecting a 0.60% rise for the reported period.
The Ministry of Internal Affairs and Communications also revealed that households of two or more people spent an average of ¥285,947 ($2,168).
On a m-o-m basis, household spending fell by 0.90% in November. Economists had anticipated a drop of 0.50%.
In a separate news release, the Statistics Bureau stated that Tokyo’s core CPI increased 4% y-o-y in December, following a 3.60% increase in the previous month and surpassing forecasts of 3.80% growth. Notably, inflation hit 4% for the first time since 1982. The robust inflation data has fueled expectations of a change in the Bank of Japan’s monetary policy once again. Notably, 375 out of 522 items recorded an increase in the core CPI figures.
Processed food prices surged 7.50%y-o-y in December, reflecting the quickest rate of increase since 1976. Despite this, inflation has been above 2% for the last seven months. However, the BoJ’s Governor, Haruhiko Kuroda, is expected to maintain his stance as the central bank anticipates inflation to drop below 2% in the forthcoming fiscal year.
The NFIB (National Federation of Independent Business) Small Business Optimism Index fell to 89.80 in December from 91.90 in the prior month. Economists had anticipated a reading of 91.60. The reported figure marks the 12th successive month below the 49-year average of 98.
Owners anticipating an improvement in the business environment in the forthcoming six months fell to -51% in December from -43% in November. 32% of business owners consider inflation their major problem.
Commenting on the situation, NFIB Chief Economist Bill Dunkelberg stated, “Overall, small business owners are not optimistic about 2023 as sales and business conditions are expected to deteriorate.”
While 55% of owners either hired or made an attempt to hire in December, 93% of those who hired or made an attempt to hire faced a scenario of few or no qualified applicants for the positions they were attempting to fill. Also, 55% of owners recorded capital outlays in the past six months.
The weak economic data from both the US and Japan is expected to keep the USD/JPY pair range-bound in the short term.
Technically, the USD/JPY pair is rising after testing the support at 131.50. The next resistance is anticipated only near 134.45. Additionally, the currency pair is trading above its 50-day moving average while the stochastic indicator is ascending toward the bullish zone. Therefore, we anticipate the USD/JPY pair to remain in an uptrend in the days ahead.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
