USD/JPY higher as Japan’s services slips

The Japanese yen is lower on Monday. USD/JPY is trading at 156.12, up 0.31% in the North American session at the time of writing.

Japanese services activity declines

Japan’s tertiary industry activity for March, a measure of activity in the services sector, posted its first decline this year. The index fell by 2.4%, following a 2.2% gain in February and shy of the market estimate of 0.1%.

The weak services data follows a disappointing GDP report last week, with first-quarter GDP contracting by 2%. This followed a revised 0% reading in Q4 2023 and points to a sluggish economy.
The Bank of Japan has hinted that it is on the path to normalizing monetary policy, which has sent Japanese government bonds sharply higher. Yields on 20-yr and 30-yr government bonds have already their highest level in 10 years and the 10-year yield rose to 3.2 basis points to 0.98% on Monday, its highest level since 2013.

The central bank was an outlier when the other major central banks were raising rates to stifle inflation, and the BoJ is again on the outside as it is expected to raise rates this year while its colleagues are likely to cut rates. There is growing speculation that the BoJ will raise rates up to three times before the end of the year, which should give the ailing Japanese yen a much-needed boost.

There are no economic releases out of the US today, leaving FedSpeak the main attraction. We’ll hear from a host of FOMC members later in the day and investors will be hoping for some hints about a Fed rate cut. The markets have priced in an initial rate cut in September at 62%, according to CME’s Fedwatch.

USD/JPY Technical

  • USD/JPY is testing resistance at 156.02. Above, there is resistance at 156.36
  • There is support at 155.63 and 155.29

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Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental and macroeconomic analysis, Kenny Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in major online financial publications including, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.