Yen Little Moved after CPI Prints Above BoJ Target for Fifth Straight Month
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- Japan’s headline CPI inflation figure printed at 3.3% y/y vs. 3.3% y/y expected; prior at 3.4% y/y
- The BoJ’s target inflation rate is set at 2.0 percent
- USD/JPY was relatively little moved after the report
Japan’s inflation rate is running well above the Bank of Japan’s 2-percent target. The country’s August National CPI reading printed a 3.3 percent clip – in-line with the 3.3 percent forecast and a tick down from the 3.4 percent pace the previous month. So-called ‘core’ data (excluding fresh food and energy) showed a steady pace of 2.3 percent expansion. Where this data lacks for ‘surprise’ it makes up for it in historical context.
Japan has long struggled with an era of deflation and disinflation. A two-decade plague following Asia’s financial crisis, the government and central bank looked to revive price pressures (as well as economic growth and wage growth) through extraordinary measures. The BoJ’s open-ended stimulus program introduced in April 2013 was labeled an effort to end weak price pressures once and for all. Traction didn’t take however until a year later when Prime Minister Abe introduced a sales tax hike that reversed a long-ago cut. Since the sharp increase in price growth, the central bank and government have backed off their verbal concerns over the level of the Japanese Yen. With the USDJPY trading just off six-year highs, Currency Strategist Ilya Spivak urges caution around resistance he says rests around 109.22
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