Home USD/JPY Price Analysis: Tokyo’s Inflation Hits 40-yr Highs

USD/JPY Price Analysis: Tokyo’s Inflation Hits 40-yr Highs

  • Tokyo’s inflation hit 3.6%, higher than forecasts.
  • Tokyo’s inflation casts doubt on BoJ’s belief that cost-push inflation is temporary.
  • There is a higher chance that Japan’s nationwide inflation has increased after Tokyo’s report.

Today’s USD/JPY price analysis is bearish. Japan’s capital city’s core consumer prices, a key predictor of national trends, increased at their quickest annual rate in 40 years in November. It exceeded the central bank’s 2% target for a sixth consecutive month, indicating broader inflationary pressure.

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Some analysts argued that the increase cast doubt on the Bank of Japan’s (BOJ) belief that recent cost-push inflation will prove temporary because it was driven by food and fuel prices and affected various items.

According to government data released on Friday, the Tokyo core consumer price index (CPI), which includes fuel but excludes fresh food, was 3.6% higher in November than a year earlier. The gain was higher than the 3.4% increase reported in October and the median market prediction of 3.5%. Inflation in Tokyo last accelerated faster in April 1982, when the core CPI increased by 4.2% over the previous year.

“Price hikes are broadening and suggest the weak yen could keep inflation elevated well into next year,” said Mari Iwashita, chief market economist at Daiwa Securities.

“Core consumer inflation may stay around the BOJ’s 2% target for much of next year, making it hard for the bank to keep arguing that the price rises are temporary.”

The chances of future increases in national core consumer prices, which in October were 3.6% higher than a year earlier and also represented a 40-year high, have increased after the Tokyo CPI data. Official national figures for November are expected on December 23.

USD/JPY key events today

There won’t be any significant news releases from Japan or the United States, so the price will likely consolidate.

USD/JPY technical price analysis: Bears come up against strong support at 138.03

USD/JPY price analysis

Looking at the 4-hour chart, we see the price trading below the 30-SMA and RSI below 50, a sign that bears are holding the reins. Bears showed strength when they broke below the 30-SMA and 140.01 support levels. This was the first sign of a shift in sentiment.

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Since then, the price has fallen to 138.03 support, where it has paused. Bears might attempt to break below this support. If they succeed, the bearish trend will continue. However, if the support holds, the price might retest the 30-SMA before the downtrend continues.

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Saqib Iqbal

Saqib Iqbal

Saqib Iqbal is a market analyst, prop fund trader and mentor, serving the industry with his analysis and educational content since 2011. The author has great exposure to different financial markets and institutions. He's well-known for his day trading reviews and multiple timeframe analysis.