The yen fell against the greenback on Friday after the release of lower-than-anticipated Tokyo’s core CPI data for January. The solid US personal income data also enabled the greenback to consolidate its ground against the yen. Overall, the USD/JPY pair rallied from a low of 147.42 to a high of 148.03 in the past 24 hours.
According to Japan’s Statistics Bureau, the core consumer price index (CPI) of Tokyo’s Ku-area inched up 1.60% y-o-y in January but slowed down from a 2.10% rise in the previous month and missed forecasts of 1.90%. The reported reading, reflecting the third successive month of decline, was the lowest since March 2022 and below the Bank of Japan’s targeted level of 2% for the first time since last May. Notably, Tokyo’s headline inflation also fell to 1.60% y-o-y in January from 2.40% in December.
The decline in Tokyo’s core CPI was led by a decrease in energy costs and an easing of prices related to accommodation and processed food.
The latest data is expected to further complicate the central bank’s evaluation of inflation dynamics, specifically as it assesses the suitable timing for phasing out the negative interest rate that exists nowhere else in the world. Specifically, the figures may imbue a sense of cautiousness within the Bank of Japan regarding the anticipated rate hike in the months ahead.
Of late, BOJ Governor Kazuo Ueda has opined that the probability of consistently reaching the 2% inflation target through wage increases is progressively on the rise. He further indicated that if this trend continues, the central bank will reassess its massive stimulus program. Of particular concern to the BOJ is the recorded decline in service price gains, which fell from 2.2% to 1.7% in December.
According to the US Bureau of Economic Analysis, the PCE price index increased 0.20% m-o-m in December. Excluding food and energy, the country’s core PCE (personal consumption expenditures) index inched up 0.20% m-o-m in December, following an increase of 0.10% in the previous month and in line with economists’ estimates.
Prices for goods fell by 0.20% in December. However, prices for services grew by 0.30% in December. Food prices rose by 0.10%, while energy prices inched up 0.30%.
Personal income rose by 0.30% m-o-m in December to $60 billion. Disposable personal income grew by 0.30% m-o-m in December to $51.80 billion. Likewise, personal consumption expenditures (PCE) inched up 0.70% to $133.90 billion.
The weak inflation data from Japan is expected to keep the USD/JPY pair slightly bullish in the short term.
The historical price chart indicates that the USD/JPY pair is rising after testing the support at 146.60. The next resistance is anticipated to be only near 149.80. Additionally, the currency pair is trading above its 50-day moving average, while the stochastic indicator is in the bullish zone. Therefore, we anticipate the USD/JPY pair to remain in an uptrend for the next few trading sessions.
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.
