Talking Points

The Japanese Yen gained very slightly against the US Dollar following the release of Japanese inflation numbers These were broadly as expected, with consumer prices ex-fresh-food creeping into positive territory Overall pricing power remain extremely weak, however, and household spending took a big hit The Japanese Yen didn’t move much against the US Dollar on Friday, although it strengthened a little, following the release of some broadly as-expected inflation data out of its home economy.

Japan’s official headline Consumer Price Index rose 0.4% on the year in January. That was exactly as markets had expected and only a tick above December’s 0.3% level. Excluding volatile fresh food prices the index was up 0.1%, just a little stronger than the flat reading expected. Stripping out both fresh food and energy prices, the CPI rose 0.2%, exactly as expected.

The final index is the one closest to the US “core” inflation measure, and it’s also the figure targeted by the Bank of Japan at 2%, so the huge task faced by the authorities in getting anywhere near that level is as clear as ever. Sadly for Tokyo that’s not news. There were some crumbs of comfort for policy makers, but only crumbs. The CPI excluding food prices was at least positive, if only just, having fallen for many months. Moreover on-month CPI inflation hit 1%, very high for the series.

USD/JPY slipped after the data, but by very little. It got down to 114.38 from 114.42 just before the release

Just a shrug. USD/JPY

Japanese Yen Creeps Higher After As-Expected CPI Chart Compiled Using TradingVirw

Other numbers released at the same time proved a mixed bag. Overall household spending fell a chunky 1.2% on the year in January, well below the 0.4% fall predicted. The month’s jobless rate was as expected, though, at 3%, while the job-applicant ratio was steady at 1.43.

Overall these data do nothing to change the familiar picture of an economy desperately short of pricing power, despite a relatively buoyant employment picture. In any case the markets are currently focused on the US Federal Reserve and a heightened sense of certainty that it will raise interest rates this month.

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— Written by David Cottle, DailyFX Research

Contact and follow David on Twitter:@DavidCottleFX

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