USD/JPY Trades Above 150 As Japanese Inflation Continues to Fall

USD/JPY has been consolidating in the last two weeks, after making a strong bullish move in previous weeks which sent the price above 150 where it continues to trade. The Bank of Japan (BOJ) has refrained from raising interest rates, with inflation falling, as last night’s PPI report showed.

Last week’s economic data from Japan indicated a decrease in business optimism, which fell to the lowest level of confidence in a year. Meanwhile, the Japanese Cabinet Office revised its economic outlook in February. This dip reflects a decrease in business optimism, with the study indicating the lowest level of confidence since January 2023.

Besides that, the Japanese officials also revised Japan’s economic outlook for February, so while the US economy is recovering well, the Japanese economy is weakening, which is a positive divergence for USD/JPY . Below is the CSPI report for last month:

Japan’s Corporate Services Producer Price Index Report for January, Published by the Bank of Japan

• Japan’s Corporate Services Producer Price Index (January 2024) +2.1% YoY
• December Japan’s Corporate Services Producer Price Index was +2.4%

Last night’s data from the Bank of Japan revealed that Japan’s Corporate Services Producer Price Index (CSPI) for January 2024 increased by 2.1% year-on-year, which is a considerable deceleration from the 2.4% growth observed in December last year. The CSPI measures the changes in prices received by businesses for services provided domestically, excluding taxes and operating costs, which serves as an indicator of inflationary pressures within the corporate sector of Japan’s economy and is yet another indicator that inflation continues to fall to the 2% range in Japan and the BOJ has no reason to tighten now.

USD/JPY H4 Chart – MAs Keeping the Pirice Supported

However, the BOJ continues to repeat the rhetoric that it is essential to continue monitoring subsequent data releases to assess the trajectory of inflation and its implications for monetary policy and economic conditions in Japan. But, all this is keeping the USD to Yen rate above 150. However, we’re not seeing an attempt to test the all-time high just below 152 yet.

USD/JPY Live Chart