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Japan’s fresh inflation numbers already consist of full data for the month of April, when the sales tax hike came into effect. While  one figure came out below expectations, the general picture can make the BOJ pat itself on the back for succeeding in the battle against deflation.

However, they would probably prefer to keep their smiles to themselves, as any strengthening of the yen could undermine the achievements.

The data

Last month, Japan released early April figures for Tokyo, and national figures for March. This time, we already have May data from the  capital and the national full data for April. In Tokyo, CPI rose 3.1% after 2.9% in April. Excluding food and energy, a rise of 1.9% was recorded. Excluding fresh food, we have a small disappointment with 2.8% instead of 2.9%.

On the national level, CPI rose by 3.4%, CPI without food and energy rose by 2.3% and excluding fresh food, we have a rise of 3.2%. All the numbers are way above the 2% level, but they are skewed because of the tax hike.

In a calculation that excludes the tax hike, we have an annual rise of core CPI of 1.5%, the highest since 2008. This is the big achievement of the BOJ that clearly overshadows any small miss in the overall inflation data.

Analysts’ consensus regarding further stimulus from the BOJ is  becoming clearer: no further moves are expected anytime soon. Also the IMF echoes these thoughts.

However, we can expect the BOJ to continue saying they are ready to act and not rule this option out: any appreciation in the exchange rate of the yen could undermine  this achievement, which is only beginning to emerge.

USD/JPY ignored the data and remained depressed under 102. Critical support awaits at 100.75.

Further reading:  Taper talk reaches Japan, but may not be that bullish for JPY