The BoJ released the minutes of its October policy meeting, and unsurprisingly, the yen yawned in response. Some members noted that inflation remains subdued despite higher input costs and the weak yen, and called for monetary easing to be maintained. Inflation has been high on the agenda of many of the major central banks, including the Federal Reserve and the Bank of England, which have tightened policy in response. This trend has not extended to Japan, as the economy continues to struggle with supply constraints and the spread of Covid.
CPI stagnant but WPI soars
Japanese companies have been hit with higher costs, as energy and raw material prices have surged. However, firms remain reluctant to pass on rising costs to consumers, which has kept consumer inflationary prices in check. The discrepancy in wholesale and consumer prices was massive in October – Core CPI rose a negligible 0.1% y/y, while wholesale prices soared 8.0% y/y, the sharpest rise since in over 40 years. Even with the jump in wholesale prices, the BoJ’s inflation target of 2% remains far off and this is unlikely to change in the near future. As one member stated in the minutes, the BoJ has no reason to normalize monetary policy until inflation reaches the bank’s inflation target is reached.
- USD/JPY is testing resistance at 114.27. The next resistance line is 114.82
- There is support at 113.16 and 112.60
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