The Japanese yen is showing limited movement on Tuesday. In the North American session, USD/JPY is trading at 157.33, up 0.11% on the day at the time of writing.
The yen is having a terrible time as it continues to lose ground against the strong US dollar. Since October 1, the yen has fallen 9.5% and the woes of the yen could force the Bank of Japan to intervene in the currency markets to shore up the ailing currency.
BOJ's core CPI rises to 1.7%
The BoJ Core CPI index, which is closely watched by the central bank, rose to 1.7% y/y in November, up from 1.5% in October and above the market estimate of 1.5% . This announcement follows the main national inflation announcement last week, which jumped to 2.9% in November from 2.3% in October. This was the highest level since October 2023. The gain was driven by sharp increases in food and electricity prices. In particular, core CPI, which excludes food, rose from 2.6% to 2.7% and core CPI, which excludes food and energy, climbed from 2.3% to 2.4% .
Any way you cut it, inflation is trending higher and that has raised expectations that the Bank of Japan will raise rates in early 2025. The BoJ kept rates on hold at last week's meeting and BOJ Governor Ueda said that because core inflation was only increasing “at a moderate pace”, the BoJ could take its time in raising rates. However, with inflation rising and the yen pushed closer to the 160 level, the BoJ could respond with a rate hike as early as January.
The BoJ is also worried about the incoming Trump administration, which has promised to impose tariffs on US trading partners. Bank policymakers will be watching closely to see if Trump moves forward with tariffs or if his bark is worse than his bite. The BoJ next meets on January 24, a day after Trump is sworn into office.
Technical USD/JPY
- Resistance is at 157.51 and 157.86
- 156.93 and 156.58 are the next support levels
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