The Japanese Yen has been the weakest currency this year, as other major central banks kept raising interest rates in a hectic manner, while the Bank of Japan (BOJ) hasn’t moved them at all, which in fact is keeping mortgage and loan payments low in this time of crisis. The FED has been at the forefront of this extreme tightening period, so the USD has been really bullish, which has been fuelling the surge in USD/JPY.

Although, that continued until the Ministry of Finances of Japan intervened two major purchases in September and in October, while the BOJ has carried out some smaller interventions. But, most of the weakness on this pair recently has come from the decline in the USD, especially after the consumer inflation report CPI which showed a slowdown.

USD/JPY H4 Chart – The 20 SMA Acting As Resistance

The BOJ should be happy as the decline continues

That has taken some pressure off the FED which has softened the rhetoric and the terminal rate now stands below 5%. Today, the producer inflation report (PPI) was released and is showed a cool-off as well,  with the PPY YoY coming at 8.0% from 8.5% previously, which was revised lower today to 8.4%.

US October PPI Producer Price Index Report

• October PPI +8.0% vs +8.3% expected
• September PPI was +8.5% (revised to +8.4%)
• PPI MoM +0.2% vs +0.4% expected
• Prior PPI MoM reading was +0.4%
• Core PPI YoY ex-food and energy +6.7% vs +7.2% expected
• Prior core PPI ex-food and energy +0.0% m/m vs +0.3% expected
• Prior ex-food and energy m/m +0.3% (revised to +0.2%)
• Goods PPI +0.6%
• Services PPI -0.1%
• Full release

Today’s decline in the PPI is more good news for trades betting on a top in inflation and will give the FED further reason to slow down with hikes and pivot. The USD went through another crash on these numbers with USD/JPY falling nearly 200 pips to 137.70s. This was a big move on an indicator that isn’t much of a market mover usually.

USD/JPY Live Chart