NIKKEI225: Tokyo Inflation Increases Hike Bets – Yen Surges
Inflation data from Japan’s capital rose more than expected as the market gears up for another rate hike. The yen rises to highest level in 6 weeks.
- Tokyo Core CPI at 2.2% compared to forecasts of 2.1%
- Industrial Production lower than forecast for November at 3%
- Retail Sales in October at 0.1%, forecast at 1.7%
Today’s data from Japan shows a decline in consumer spending and an increase in inflation. The Core CPI MoM for November came in higher than analysts’ expectations and above the central bank’s 2% target.
The markets are now expecting a rate hike at the BoJ’s next meeting in December. The USD/JPY fell to levels not seen in 6 weeks. Whereas the NIKKEI225 turned south after yesterday’s rally losing 0.6%.
In a counter trend to inflation, retail Sales MoM for October shrank to 0.1%, when forecasts were for an increase to 1.7%.
Industrial Production expanded in October MoM by 3%, which was lower than forecasts of 3.9% expansion. Manufacturers surveyed by the government expect this trend to continue in the coming months.
The mixed data reflects the sideways price action for the NIKKEI225 over the past several weeks. The main Japanese stock index has been in a wide range set by the high of 41,112 and a low of 37,750.
NIKKEI225 Live Chart
BoJ Rate Hike Timing
The likelihood of a rate increase in the BoJ meeting on December 18-19 are now increasing. A Reuters poll showed that 50% of the economists surveyed believed that the central bank would hike rates at the next meeting.
The chief economist at SMBC Nikko Securities said, “Looking at domestic factors, there’s nothing that prevents the BOJ from raising rates further,” who expects the BoJ to hike rates at the meeting in December.
Central Bank Governor Ueda said last week that the economy was on path to achieving sustained wage-driven inflation. The comment leaves the door open to further rate hikes next month.
Some analysts expect the BoJ to also weigh the external threat of higher tariffs once the Trump administration takes office. The reasoning is that export tariffs would cause disruption to the economy.
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