Japan's core Consumer Price Index (CPI) rose 3.0% year-on-year in February, against a forecast of +2.9%. The index that excludes fuel costs rose 2.6%, indicating increased price pressure, which in turn boosts market expectations of further interest rate hikes. The rise in the core CPI, which excludes the impact of food price volatility, exceeded a median market forecast of a 2.9% increase. This kept core inflation above the BOJ's 2% target for the 35th consecutive month. Households continue to face rising living costs, with vegetable prices up 28% year-on-year, rice prices up 81.4%, and electricity bills up 9%.
BOJ Governor Kazuo Ueda suggested that higher food prices and stronger-than-expected wage growth could boost core inflation.
The CPI data will be among factors that the central bank will carefully examine when making its new quarterly growth and price forecasts, which are due to be presented at its next meeting from April 30 to May 1.
High core inflation in February suggests that the BOJ may raise rates at its next meeting in May, with the possibility that the regulator may tighten monetary policy more aggressively than widely expected, which could weaken USDJPY sharply. Last year, the BOJ exited its decade-long, massive stimulus programme and raised interest rates to 0.5% in January, considering that Japan was getting closer to its inflation target.
More than two-thirds of economists polled by Reuters expect the BOJ to raise rates up to 0.75% in July.
The overall recommendation is to sell USDJPY.
Profits should be taken at the level of 145.0. A Stop loss could be set at the level of 153.0.
The volume of the opened position should be set in such a way that the value of a possible loss, fixed with the help of a protective Stop loss order, is no more than 1% of your deposit funds.
This content is for informational purposes only and is not intended to be investing advice.
