- The Japanese yen strengthened following the release of Tokyo CPI inflation data, which showed an increase in December.
- The Tokyo Consumer Price Index in December was 3.0% compared to the previous year, up from 2.6% in November.
- The US dollar rose slightly as the possibility of further interest rate cuts by the US Federal Reserve (Fed) grew.
On Friday, the Japanese yen (JPY) strengthened against the US dollar (USD). The USD/JPY pair is rebounding from recent gains as the Japanese Yen (JPY) strengthens following the release of Tokyo Consumer Price Index (CPI) inflation data. The statistics are expected to keep the Bank of Japan (BOJ) on track for a rate hike in January.
The headline Tokyo CPI inflation rate was 3.0% year-on-year in December, up from 2.6% in November. On the other hand, the Tokyo CPI, which excludes fresh food and energy, increased by 2.4% compared to the previous year in December (2.2% in the previous month). Tokyo CPI excluding fresh food also rose 2.4% year-on-year in December, slightly lower than the 2.5% expected, but higher than November's 2.2%.
The Bank of Japan (BOJ) on Friday released a summary of its December monetary policy meeting, highlighting plans to adjust easing measures if economic conditions match expectations. One BOJ board member stressed the importance of monitoring momentum in wage negotiations, while another stressed the need to scrutinize data to decide on changes to financial support.
Yen strengthens due to higher probability of Bank of Japan interest rate hike in January
- The US Dollar Index (DXY), which measures the value of the US dollar (USD) against six major currencies, is trading around 108.10, just below its highest since November 2022. However, the dollar's appreciation may be constrained. Treasury yields remained low on Friday. At the time of writing, the two-year bond yield is 4.32% and the 10-year bond yield is 4.57%.
- The downside of the USD/JPY pair may be limited as the US dollar will be supported by rising expectations for a reduction in interest rates from the US Federal Reserve (Fed). The Federal Reserve cut interest rates by a quarter of a percentage point at its December meeting, lowering its outlook for rate cuts in 2025 from the previously expected four to just two. However, moderate US PCE inflation data weakened the chances of further rate cuts next year.
- On Friday, Japan's Finance Minister Katsunobu Kato said he had recently seen unilateral and sharp movements in foreign exchange (FX). Mr. Kato further stated that appropriate measures will be taken against excessive exchange rate fluctuations.
- The Bank of Japan's October meeting minutes released this Tuesday reiterated the possibility of gradual rate hikes, potentially reaching 1.0% by the end of fiscal 2025, if inflation trends match expectations. said. The minutes also emphasized a cautious approach to wage-driven monetary policy. Economic growth amid domestic and global uncertainty, and fiscal measures to counter deflationary pressures.
- Bank of Japan Governor Kazuo Ueda said last week that the central bank expects Japan's economy to move closer to sustainably achieving the bank's 2% inflation target next year. Ueda also said, “The timing and pace of adjusting the degree of monetary easing will depend on future economic, price, and financial conditions.''
USD/JPY continues to fall below 158.00, setting a new monthly high
USD/JPY was trading around 157.70 on Friday. Daily chart analysis shows that it is trending up within an ascending channel pattern and the bullish trend continues. The 14-day Relative Strength Index (RSI) is just below the 70 level, supporting the bullish outlook. A breakout above the 70 mark could indicate an overbought condition and could lead to a downward correction in the pair.
USD/JPY may test Thursday's monthly high of 158.08. A break above this level could support the pair targeting the upper bound of the ascending channel around the 160.30 level.
On the downside, the USD/JPY pair is likely to find major support at the 9-day exponential moving average (EMA) around 156.48, which coincides with the lower limit of the ascending channel.
USD/JPY: Daily chart
Today's Japanese yen price
The table below shows the percentage change of the Japanese Yen (JPY) against major listed currencies today. The Japanese yen was the strongest against the Australian dollar.
| USD | EUR | GBP | JPY | CAD | australian dollar | new zealand dollar | swiss franc | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.11% | 0.03% | -0.20% | -0.02% | 0.18% | 0.07% | 0.06% | |
| EUR | -0.11% | -0.08% | -0.33% | -0.13% | 0.08% | -0.06% | -0.05% | |
| GBP | -0.03% | 0.08% | -0.26% | -0.05% | 0.16% | 0.03% | 0.03% | |
| JPY | 0.20% | 0.33% | 0.26% | 0.16% | 0.39% | 0.16% | 0.18% | |
| CAD | 0.02% | 0.13% | 0.05% | -0.16% | 0.19% | 0.09% | 0.08% | |
| australian dollar | -0.18% | -0.08% | -0.16% | -0.39% | -0.19% | -0.12% | -0.12% | |
| new zealand dollar | -0.07% | 0.06% | -0.03% | -0.16% | -0.09% | 0.12% | 0.00% | |
| swiss franc | -0.06% | 0.05% | -0.03% | -0.18% | -0.08% | 0.12% | -0.00% |
The heat map shows the percentage change between major currencies. The base currency is selected from the left column and the quote currency is selected from the top row. For example, if you select Japanese Yen from the left column and move along the horizontal line to US Dollar, the percentage change displayed in the box represents JPY (Basic)/USD (Quote).
economic indicators
Tokyo Consumer Price Index (YoY)
Consumer Price Index (CPI) announced by Tokyo Metropolitan Government statistics bureau Measures monthly price changes in goods and services purchased by households in the Tokyo area of Japan. The index is widely considered a leading indicator of Japan's overall CPI, as it is released several weeks before the national measurements. The YoY measure compares the price of a base month to the same month of the previous year. Generally, higher numbers are considered bullish for the Japanese Yen (JPY), while lower numbers are considered bearish.
