JPY: Yen Rises as Japan’s Services PPI Hits 9-Year High
The Japan Service PPI index came at 2.8% in the April month versus 2.3% printed in the March month and it is the fastest upmove since March 2015. The BoJ Governor Ueda said interest rates are higher from Zero level and inflation has to come near 2% target means we rise the interest rates from the current state. It is difficult to take decision when comparing to other central banks handling inflation levels. Japan Financial Minister Shunuchi Suzuki said there is possible for Potential verbal intevention in the market to avoid JPY weakness in the market.
USDJPY is moving in Ascending channel and market has reached higher low area of the channel
The Japanese Yen (JPY) continues to strengthen for the second consecutive day on Tuesday, buoyed by Japan’s Corporate Service Price Index (CSPI). The index recorded a year-over-year increase of 2.8% in April, surpassing expectations of 2.3% and marking its fastest growth rate since March 2015.
Additionally, remarks from Japan’s Finance Minister Shun’ichi Suzuki may have contributed to the Yen’s strength. On Tuesday, Suzuki emphasized the importance of stable currency movements that reflect economic fundamentals, indicating a potential for verbal intervention. He stated he is closely monitoring foreign exchange (FX) movements but did not comment on whether Japan has engaged in currency intervention.
Meanwhile, the US Dollar (USD) continues to decline, impacted by falling US Treasury yields. Traders are now looking forward to the release of the Federal Reserve’s preferred measure of inflation, the Personal Consumption Expenditures (PCE) Price Index data, due on Friday, to gauge future US monetary policy directions.
Daily Digest Market Movers: Japanese Yen extends gains on BoJ remarks
The 2024 BOJ-IMES Conference continues on Tuesday, featuring speakers including US Federal Reserve (Fed) officials such as Fed Governor Michelle Bowman and Cleveland Fed President Loretta Mester.
The Japanese Yen gained additional strength from comments by Bank of Japan (BoJ) officials on Monday. BoJ Governor Kazuo Ueda mentioned progress in moving away from zero and raising inflation expectations but noted the need to re-anchor them at the 2% target. BoJ Deputy Governor Shinichi Uchida stated that they have returned to a conventional monetary policy framework with the goal of achieving a 2% price stability target through adjustments of the short-term policy rate, successfully moving past the zero-lower bound.
In a report on Monday, the Japanese Cabinet Office maintained its economic view unchanged for the third consecutive month in May, noting that the Japanese economy continues to recover at a moderate pace, despite recent signs of a growth pause.
EURJPY is moving in Ascending channel and market has rebounded from the higher low area of the channel
In the US, the University of Michigan’s 5-year Consumer Inflation Expectations eased slightly to 3.0%, below the forecasted 3.1%. Although the Consumer Sentiment Index was revised upward to 69.1 from a preliminary reading of 67.4, it still represents the lowest level in six months. These figures likely influenced investor sentiment regarding potential rate cuts by the Federal Reserve.
Japan’s National Consumer Price Index (CPI) dropped to 2.5% year-over-year in April from 2.7% in the previous month, marking the second consecutive month of moderation but remaining above the Bank of Japan’s (BoJ) 2% target. This sustained inflationary trend puts pressure on the central bank to consider policy tightening.
JPY: Japan April Services PPI: 2.8% YoY (vs. 2.3% expected)
The Japan Service Producer Price Index (PPI) registered a 2.8% increase year-over-year in April, up from 2.3% in March, marking the fastest rise since March 2015.
Bank of Japan (BoJ) Governor Kazuo Ueda noted that interest rates have risen from zero levels, emphasizing that inflation must approach the 2% target, indicating a potential increase in interest rates from their current levels. He acknowledged the difficulty of making policy decisions, especially when compared to how other central banks are managing inflation.
Japan’s Finance Minister Shun’ichi Suzuki mentioned the possibility of verbal intervention in the market to prevent the Japanese Yen (JPY) from weakening further.
Japan’s Producer Price Index (PPI) for Services, also known as the Corporate Services Price Index (CSPI), rose by 2.8% year-over-year in April 2024. This increase exceeded expectations of a 2.3% rise and is also higher than the previous month’s increase of 2.3%.
AUDJPY is moving in Ascending channel and market has rebounded from the higher low area of the channel
The Bank of Japan (BoJ) is likely to view this as a positive sign of inflationary pressure. The BoJ is eager to move further away from its loose monetary policy, and higher inflation in the services sector can support this shift. However, for this to have a substantial impact, the inflationary pressures need to translate into higher consumer prices.
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