The Japanese yen shows little movement on Christmas Day. Japanese markets are open but with most global markets closed for the holidays, the currency markets will be very quiet today. In the European session, USD/JPY is trading at 157.29, up 0.08% on the day.
Corporate service inflation hits 3%
Japanese inflation indicators have been trending higher and were boosted again on Wednesday when Japan's corporate service price index (CSPI) climbed 3.0% in November. This marked a second straight month that the CSPI has accelerated, following a 2.9% gain in October.
CSPI measures the price that companies charge each other for services and is a key indicator of inflation in the service sector, which is closely monitored by the Bank of Japan. The increase in CSPI supports the case that wages are rising and businesses are passing on higher costs to consumers. This increase in demand-driven inflation is exactly what the BoJ wants to see before raising interest rates.
The BoJ has indicated that another rate hike is coming but did not provide any information on the timing. Some were expecting a rate hike at last week's meeting but the central bank remained on the sidelines and Governor Ueda sounded pessimistic, saying inflation was increasing ” at a moderate rate” and that the BoJ could take time to raise rates.
Is Ueda throwing up a smokescreen to keep speculators away when the BoJ is actually planning a rate hike in the next month or so? Maybe. Inflation has been rising and the yen is falling rapidly, falling 9.5% since October 1. The yen passed the symbolic level of 160 in July and could do so a- again. If the BoJ is really worried about the rapid descent of the yen, it must consider a rate hike or take more drastic action and intervene in the currency markets to shore up the ailing yen.
Technical USD/JPY
- There is resistance at 157.41 and 157.66
- USD/JPY tested support at 157.15 and 156.90 earlier. Below, there is support at 156.64
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