The Japanese yen has edged higher on Thursday. In the European session, USD/JPY is trading at 132.09, down 0.27%.
The dust has settled after Tuesday’s dramatic events, when the yen shot up 3.7%. This followed the Bank of Japan’s shocking announcement that it would widen its yield curve control on 10-year bonds from 25 bp to 50 bp. The markets were completely blindsided, which could very well be what the BoJ was hoping for. The markets hadn’t expected any policy moves until after BoJ Governor Kuroda ends his term in April, but now there is talk of major policy moves before then, such as raising interest rates out of negative territory. The BoJ releases minutes later today, but these are minutes of the November meeting. Still, with all of the drama that the BoJ has produced this week, investors will be keeping an eye on this release, looking for clues about future policy.
National Core CPI next
What will be of more interest to the markets is National Core CPI for November, which will also be released later today. The index is expected to inch up to 3.7%, up from 3.6% in October. Japan’s inflation rate is much lower than the US or the UK, but price pressures have nonetheless put the squeeze on households and businesses, which became accustomed to decades of deflation. With economic conditions improving and inflation rising, there has been speculation that the BoJ might consider major policy moves in the short-term, such as exiting from its stimulus programme. The BoJ showed this week that it was willing to make significant moves, and more tightening could be on the way.
- USD/JPY has support at 131.13 and 130.15
- There is resistance at 132.83 and 134.12
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