Yen weakness resumes amid calls for rate hikes

2024-01-16
Summary:

The yen dipped below 146 against the dollar on Tuesday, suggesting easing inflation may relieve pressure on the BOJ to end monetary stimulus.

The yen inched lower below 146 per dollar on Tuesday as more signs of moderating inflation could take pressure off the BOJ to phase out its massive monetary stimulus soon.

The Dec PPI was flat year-over-year, the first month without an advance since Feb 2021 and the 12th consecutive month in which price growth decelerated, partly due to government subsidies to curb petrol and utility bills.


The number of corporate bankruptcies in Japan surged in 2023, topping 8,000 for the first time in four years, as a rise in the price of materials and wage increases hurt corporate earnings, Tokyo Shoko Research said Monday.


The OECD urge the BOJ to gradually raise short-term interest rates and make YCC policy more flexible if inflation stays around its 2% target, wage growth accelerates and the output gap closes.


The organisation was more optimistic that inflation will more durably settle around 2%", even though the pace of price growth will likely slow somewhat this year. Kazuo Ueda stressed sustained achievement of the target had not come into sight.


The super-easy policy has eaten into the yen’s status as a traditional haven. Japanese companies are keen to expand their operations abroad, which has seen FDI outweigh overseas investment in financial instruments since 2014.


Japan’s bond market will largely take in its stride any normalization steps by the central bank this year as the environment will still probably remain substantially accommodative, said Michio Saito, known as Mr. JGB.

USDJPY

The yen managed to steady at the 50 SMA but the risk is tilted to the downside given rising geopolitical tensions. The next major support is seen around 150.00 while hitting a new low seems unlikely.


Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

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