THE TAKEAWAY: Japan CPI, industrial production figures show deflationary pressures persist > Today’s bid on the yen likely retracement from larger selloff > Abe may continue to influence yen weakness

The Japanese yen rallied slightly higher versus the U.S. dollar as consumer price figures in Japan came across the wires showing across the board deflationary pressure in November. The National CPI data showed a -0.2 percent decline on a yearly basis and -0.1 percent decline when excluding fresh food and -0.5 percent decline when excluding food and energy from the National CPI reading.

The final industrial production figures slowed by -5.8 percent in November on an annual basis underscoring the flagging CPI figures.

On a more positive note, overall household spending grew by 0.2 percent and retail trade also picked-up pace by 1.3 percent in November, year-over-year. The unemployment rate improved to 4.1 percent from 4.2 percent in November.

Forex traders have been aggressively selling the yen as new Prime Minister Shinzo Abe has called to end deflation and aggressively monetize the countries’ debt effectively debasing the low yielding currency. The yen’s strength following the data release today is likely a retracement from the strong selling efforts by FX participants.

USD/JPY, 1 Minute Chart

Forex_News_Japan_CPI_Confirms_Deflation_Yen_Retraces_Weakness_body_121228USDJPY.jpg, Forex News: Japan CPI Confirms Deflation, Yen Retraces Weakness

USD/JPY, Daily Chart

Forex_News_Japan_CPI_Confirms_Deflation_Yen_Retraces_Weakness_body_Picture_7.png, Forex News: Japan CPI Confirms Deflation, Yen Retraces Weakness