Yen Steadies Despite Weaker Tokyo Inflation

London: 9 January 2024 (TraderMade): The Japanese yen held its ground for a second day, even as core inflation in Tokyo dipped slightly below expectations. While this signals some easing of price pressures, it's not enough to shake the Bank of Japan's dovish stance yet.

The USDJPY pair declined by 0.31% to 143.7885 (at about 03:26 PM GMT)

Inflation is still above the target.

Tokyo's core CPI (which excludes food) dropped to 2.1% year-over-year in December, down from 2.3% in November. Despite this decline, it still exceeds the BoJ's 2% target for the 19th consecutive month.

Investors wait and watch

Speculation about a potential BoJ policy shift persists, keeping investors glued to BoJ meetings. While hinting at a possible change, Governor Ueda emphasizes the need for wage growth before any tightening. The next BoJ meeting is on 22-23 January.

Economic woes weigh heavily.

A weak Japanese economy and declining household spending add to the BoJ's caution. November saw household spending fall 1% month-on-month and 2.9% year-on-year, highlighting consumer anxieties amid tight economic conditions.

Uncertainty remains

Overall, the yen's stability reflects mixed signals – easing inflation but persistent concern about the BoJ's future moves and underlying economic weakness. The coming days will be crucial for understanding the yen's direction and the BoJ's next steps.