From Japan today we had inflation data for November. Inflation rates moved significantly higher, well above the Bank of Japan's 2% target rate, higher than expected, and above October levels. The “core” inflation rate, which strips out fresh food and energy prices and is closest to the US measure of core inflation, moved to its highest level since April.
Despite this the yen slipped even lower, with USD/JPY struggling to 5-month highs above 157.90.
Then we got intervention type comments from Japan's finance minister Kato. He used words just like:
- one-sided
- sharp movements
- speculation
which are indicative of a greater level of concern.
It took some time, but the yen finally showed some strength, with USD/JPY falling back to 157.15 and from there. It has been slightly lower since then.
China left its benchmark lending rates unchanged, as expected, at the monthly position today.
- the one-year prime lending rate (LPR) was kept at 3.10%,
- the five-year LPR is also unchanged, at 3.60%.
These rates were last cut in October; the 1-year with 25bp from 3.35% and the 5-year also with 25bp, from 3.85%. These cuts were the largest since LPR reform in August 2019 and marked the third reduction in 2024.
In other news the US government moved closer to a shutdown. A bill aimed at funding the government failed, prompting Trump's proposal to expand the US government debt again in the House of Congress. Republicans have a majority in the House but many disagree with the fiscal uncertainty.
Still to come is key US data from inflation – PCE – at 8.30am US Eastern time. A preview of 'areas to watch' is above.
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As I was posting we had more intervention comments from Japan, this time from Atsushi Mimura, Japan's vice finance minister for international affairs, AKA 'chief currency diplomat'. USD/JPY is little changed on these so far.
USD/JPY Update:
