Japanese Yen continues to be weigh down by doubts over the timing of the next BoJ rate hike.
Japanese Yen (JPY) meets with a fresh supply during the Asian session on Friday and drifts back closer to a multi-month low against its American counterpart. Data released earlier today showed that real household spending in Japan fell for the fourth month in November and pointed to an economic fragility. This gives the Bank of Japan (BoJ) another reason to The US-Japan bond yield differentials have widened significantly over the past month in response to the Federal Reserve’s (Fed) hawkish shift, which further contributes to driving flows away from the lower-yielding Japanese yen, which, along with a bullish US Dollar (USD), acts as a tailwind for the USDJPY pair. However, traders may decide not to place aggressive bets and instead wait for the release of the important US Nonfarm Payrolls (NFP) report later this Friday.
Daily Market Update:Japanese Yen bulls remain on the sidelines amid BoJ uncertainty.
Japan’s Economy Minister Ryosei Akazawa stated this Friday that Japan’s economy at a “critical stage” in eradicating the public’s deflationary mindset and shifting to a phase where growth spearheaded by higher wages and investment. Government data released earlier today showed that inflation-adjusted household spending in Japan – a key indicator of private consumption – fell for the fourth month, by 0.4% in November from a year earlier amid stubbornly high prices. This comes on top of a drop in real wages for the fourth consecutive month in November and points to broadening inflationary pressure, which keeps the door open for another interest rate hike by the Bank of Japan in January or March. Some investors, however, are betting that the BoJ may wait until April to seek confirmation that strong wage momentum will carry over into the spring negotiations between companies and labor unions before pulling the trigger.
The yield on the benchmark 10-year US government bond remains well within striking distance of its highest levels since the middle of last year touched last week amid the Federal Reserve’s hawkish shift after the December meeting.
Boston Fed President Susan Collins said on Thursday that the economy is on gradual.
Boston Fed President Susan Collins said on Thursday that the economy is on gradual, uneven trajectory back towards the 2% inflation target and the current outlook calls for a gradual and a patient approach to interest rate cuts.
Philadelphia Fed President Patrick Harker noted that it is taking longer to get back to 2% inflation than expected. He noted that the US central bank is still likely to continue to decrease rates but explained that the path will depend on data.
Kansas Fed President Jeffrey Schmid observed that while GDP is accelerating and inflation is approaching its objective, the labor market is nevertheless robust despite its weakness. Any additional interest rate reductions has to be measured and implemented gradually.
Michelle Bowman, a member of the Fed Board of Governors, stated that pent-up demand after the election could present inflationary risks and that the current policy stance may not be as restrictive as some may perceive it to be.
As traders eagerly await the release of the US jobs data, also known as the Nonfarm Payrolls report, later today, the US dollar is strong near a two-year peak and helps the Japanese yen pair stay above the 158.00 mark.
