Asia was in a subdued trade, with little recovery due to the strength of the US dollar and the decline in “risk” seen on Thursday. The US has a public holiday on Monday, and bond markets will close early on Friday. Traders in Asia seemed determined to close even earlier.
The focus of the session was Japan’s inflation data for April. The Consumer Price Index fell for the second consecutive month, but all three key indicators remain above the Bank of Japan’s target level of 2%. While this is good news for the Bank of Japan at first glance, the concern is that inflation remains “cost-push”. The yen is weak and is likely to remain so for some time to come. Bank of Japan policymakers are eager to see inflation move to “demand-driven”, but sustainable domestic demand is a long way off and consumption levels remain weak.
P.S.: If you’re wondering about “cost push” and “demand pull”, here’s a very simple explanation (any economics textbook will give you a more detailed explanation, if that’s what you’re after).
USD/JPY was relatively stable today, trading in a tight range around the 157.00 mark.
Other major currencies are also moving in narrow ranges. Stock prices in mainland China and Hong Kong are falling again.
