On Friday March 2nd 2018, the Japanese Statistics Bureau is going to publish data regarding Japan’s inflation during January 2018. Analysts expect that core inflation rose 0.9% on annualized basis, unchanged from December 2017. Overall inflation is expected to have risen by 1.4%, on a year-to-year basis, in January 2018. The Bank of Japan’s (BoJ) monetary policy targets core inflation, which is inflation excluding prices of fresh food.
Market analysts suggest that the rise of overall inflation will be temporary because it is attributed to the increase of fresh food and energy prices, which are both external and transitory factors for the economy of Japan.
Simultaneously, the Statistics Bureau will release the Tokyo Consumer Price Index (CPI) for March 2018. This specific index captures inflation in the area of Tokyo and its preliminary data is published one month in advance. Economists consider the Tokyo CPI data, a leading indicator for the national CPI. The consensus is that the Tokyo CPI will increase to 1.4% in March 2018 and the core Tokyo inflation will come in at 0.8%.
Bank of Japan’s Governor Haruhiko Kuroda is likely to remain in position
The Japanese Prime Minister Shinzo Abe nominated the current Bank of Japan (BoJ) Governor Haruhiko Kuroda for reappointment. Governor Kuroda will testify in Japan’s lower house of parliament on Friday 2nd March 2018. His nomination requires approval by both the upper and lower of parliament. Governor Kuroda’s reappointment is a near certainty since the governing coalition, headed by Prime Minister Shinzo Abe, holds the majority.
On Wednesday March 28th 2018, the BoJ’s Governor Haruhiko Kuroda delivered a speech in the Japanese parliament and said that the Japanese central bank’s monetary easing program won’t continue, if the inflation target is achieved. Governor Kuroda noted that any normalization of monetary easing policy will take into account the effect on the economy. He added that in the event of normalization, the followed process will be gradual.
Japanese inflation estimates
A report by Nomura Group, released on February 22nd 2018, said that the forecast inflation and core inflation figures for January 2018 would mark a weak result. Nomura analysts wrote in their report that Japan’s inflation has remained on a gradual uptrend because of the rise in imported goods’ prices and the Japanese Yen’s depreciation since 2016. Economists at Nomura forecast that the Japanese core CPI will rise to around 1.2% by summer 2018, also predicting that the USD/JPY exchange rate will edge up, coming in at ¥120 by the end of 2018.
Japanese Yen strengthens against US Dollar in January and February 2018
A CNBC (Consumer News and Business Channel) report, published on February 28th 2018, noted that the Japanese Yen is one of the best performing currencies since the beginning of 2018, gaining 4.7% in value against the US Dollar. A Morgan Stanley report, released on February 20th 2018, said that its analysts “see further room for the Japanese Yen’s appreciation.”
A strengthening Japanese economy has played a significant part in the Japanese Yen’s appreciation. The Japanese economy kept growing for an eighth consecutive quarter in the three months to December 2017, which is its longest expansion streak in the last thirty years. STO provides its clients with a modern online trading platform and advanced trading tools which help traders form a foreign exchange trading strategy that can accommodate their needs.
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