Japanese CPI Jumps Again
The BOJ’s commitment to maintaining an easing presence in the market is being tested further this week. The latest econ data shows that Japanese CPI hit forty-year highs last month at 2.7%, rising from the prior month’s 2% reading and well above the 2.2% reading the market was looking for. Annually, CPI rose at 3.6%, above the 3.5% increase the market was looking for, marking the fastest pace of inflation since 1982 in Japan. Japanese CPI has now spent seven consecutive months above the BOJ’s 2% target, raising serious questions over the central banks easing strategy.
On the back of the data, BOJ governor Kuroda was quick to reaffirm the bank’s commitment to keeping rates at ultra-low levels in order to support the economy. However, Kuroda did acknowledge that price increases were significant and subject to upside risks in the near-future.
Speculators vs BOJ
Despite the BOJ’s attempts at underpinning JPY, the currency has weakened again recently creating further upward prices pressures in the domestic economy. Withs peculators essentially pitted against the BOJ, JPY looks vulnerable to further downside while the BOJ refuses to budge on rates, regardless of other tactics such as FX intervention.
NZDJPY has been stalled against the 87.15 – 87.88 level resistance since Q1, despite several attempts at breaking higher. Price is now once again pushing up against the level and with the retail market heavily short, risks of an upside break are growing, particularly with the RBNZ head tonight. If NZDJPY does break above current resistance, 89.12 will be the initial target on the move with the near-term focus remaining bullish while price holds above 87.88.