Inflation Remains Low in Japan – USD/JPY Remains Bullish

USD/JPY was increasing fast last year and in the first two months of 2021, but it has gained incredible pace since the beginning of May, when the conflict in Ukraine started. The chart shows this, with smaller moving averages such as the 20 SMA (gray) and the 50 SMA (yellow) acting as support. This pair has gained nearly 15 cents during this time as the JPY tumbled lower, despite being a safe haven that should increase in times of uncertainty.

Inflation has been slow to pick up in Japan, which has been one of the reasons for this decline in the Yen, while in other Europe and the US inflation has been surging, particularly this year, increasing to levels never seen before. This has forced central banks to turn hawkish and start hiking interest rates, while the Bank of Japan has more room to maneuver. Today’s headline CPI report posted an increase from 0.9% to 1.2%, but that’s still below expectations of 1.3% and much lower than in the West.

USD/JPY Daily Chart – The 20 SMA Holding As Support

Smaller MAs Keeping USD/JPY Bullish

Japan CPI Inflation Report for March

• CPI inflation YoY 1.2% vs expected 1.3%
• Ferbuary headline CPI was 0.9%
• Core CPI YoY excluding Fresh Food 0.8% vs 0.8% expected,
• February core CPI was 0.6% (0.8% is its highest since January 2020)
• Core CPI YoY excluding Food, Energy -0.7% vs -1.1% expected
• Prior core CPI YoY was -1.0%

A Japanese government official says that the headline CPI rate was likely pushed higher by the fading impact of cell phone fee cuts. Next week we have the Bank of Japan meeting which is expected to upgrade their inflation forecasts. So, this will be keeping the JPY on the backfoot and JPY/USD bullish.

USD/JPY Live Chart