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Yen Steady as Japan Deflation Matches Forecasts

Yen Steady as Japan Deflation Matches Forecasts

David Cottle, Analyst

Talking points

  • The Yen held steady after a raft of generally as-expected consumer price inflation data
  • The national rate of deflation remained steady at 0.5% on the year in September
  • The Tokyo rate for October, a leading indicator, unwound somewhat, coming in at -0.4%

The Japanese Yen was steady against the US Dollar on Friday after official Japanese inflation data came in as expected.

The national consumer price index fell by 0.5% on the year, the same rate of deflation as that seen in August.

Excluding the often-volatile effects of food and energy prices CPI was flat in September. This was stronger than the 0.1% expected and the 0.2% fall seen last month.

Overall the data make it clear that the long and strenuous efforts of the Japanese authorities to return some pricing power to Japan are failing to show much of a payoff.

Japan has now been in deflation for seven consecutive months.

As a result, theBank of Japan has embarked on a new policy framework aimed at controlling interest rates. The new program also included adjustments to the volume of its asset purchases.

The International Monetary Fund (IMF) recently upgraded its outlook on the Japanese economy for this year and 2017.

Its October World Economic Outlook report projected GDP growth of 0.5% in 2016 and 0.6% in 2017, up from a July estimate of 0.3% and 0.1%, respectively.

In the markets USD/JPY was at 105.23 after the data. It was at 105.25 minutes before the numbers were released.

There was some slightly better news in the leading, Tokyo CPI. That is released for the current month, rather than the last month covered by the national figure. It fell by 0.4% in October, having dropped by 0.5% in September.

Other Japanese data released at the same time came in a bit stronger than forecast.

Household spending fell 2.1%. That was better than both the 2.7% markets had been looking for and the 4.6% slide seen in August.

September’s jobless rate also ticked lower. At 3% it was below the previous month’s 3.1%.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.