JPY Daily News

Deflationary Pressures Continue to Plague Japan

Yesterday Japan released a batch of economic data that failed to live up to expectations. The most worrying piece of data is the core CPI data numbers which show deflationary pressures are potentially having a negative impact on the Japanese economy. The core CPI data showed a -0.2% y/y decline over the month of November after prices fell in October by -0.1% y/y. The Tokyo core CPI improved slightly, falling by -0.3% after a -0.5% y/y drop in over October. Also worrying is disappointing industrial production that declined -2.6% m/m. Consensus forecasts were for a drop of only -0.7%. Household spending plummeted by 3.2% y/y. Perhaps this is a sign Japanese consumers are delaying purchases on anticipation of additional price declines.

The US Treasury report signaled out Japan and not China for its currency market intervention. Despite the harsh rhetoric the move doesn't signal a policy change for the US which hasn't participated in a JPY intervention since the earthquake/tsunami in March.

The USD/JPY has continued its decline for the fourth consecutive day following the batch of poor data. The pair failed to make a break of 78.20 at its falling trend line from the 2007 high and is looking to test the initial support of 77.15 off of the December low. A break here opens the door to the November low of 76.55.

Current Time: 05/27 00:54 GMT

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#	Time	$€£¥	Event	Per.	Prev.	Fore.	Act.	Imp.
12/29
	23:15	JPY	Manufacturing PMI		49.1	*	50.2