- EUR/JPY invents sanguine Japanese data and increased inflation.
- German retail sales and preliminary inflationary data provide a mixed image of the euro, providing additional wind for the ECB.
- The Japanese bank and the European Central Bank depends on the price of EUR/JPy depending on the data.
Euro (EUR) is under re -pressure on Japanese Jena (JPY), because investors weigh constant inflation in Japan in relation to supple consumers and inflation data from the euro area. Since the European Central Bank (EBC) is already in the mitigating and bank of Japan (Bij) in the direction of further exacerbation of the policy, the wider background changes in Jen’s favor.
At the time of writing this text, EUR/JPY trades below 164.00, and another support layer rests at 163.00.
Resistant retail sales and growing inflation in Japan support Jen
The latest data of Japan again aroused expectations for further exacerbation of the boy. The basic indicator of consumer prices in Tokyo (CPI), the leading inflation rate, increased by 3.4% y / RW of May, compared to 3.5% in the previous month, while CPI excluding fresh food increased by 3.6%, and its highest level for two years. The data showed that the boost was caused by rapidly higher food prices, including a 93% boost in rice costs.
Retail sales also exceeded expectations, increased in April by 3.3% y / y, indicating that consumer demand remains resistant despite rising prices. Industrial production in April by 0.9% mother, which is a smaller decline than the expected spasm 1.4%, which increases the evidence that the economy of Japan persists better than expected.
Together, these numbers strengthened the case of another foot boost from the Bank of Japan. After leaving negative interest rates at the beginning of this year, the central bank increases to further pressure to normalize the policy, especially if inflation still surprises from above.
German retail sales and inflation are provided by mixed signals
However, the last data from Germany, the largest euro zone economy, painted a more tender picture. Retail sales in April dropped by 1.1% MOM, there is a lack of expectations as to 0.2% growth. Although the number of Yoy showed a certain force at the level of 2.3%, a edged monthly decline raised concerns about the health of domestic demand.
Inflation data was mainly in line with the harmonized consumer price indicator (HICP)- a standardized measure of the European Union- slightly above expectations, increasing by 0.2% Mom and 2.1% y /. Still, EBC remains dependent on data, balanceing economic perspectives with the expectations of inflation.
EUR/JPY browsing the expectations of the discrepancy of politics between EBC and BOJ
The discrepancy of the policy between the European Central Bank and the Japan Bank is becoming more and more clear. While EBC seems to be careful about the indicators among mixed economic signals, the boy is under growing pressure to get worse when inflation gains adhesion.
This discrepancy confirms the Bears of EUR/JPY. As long as the Japanese inflation remains forceful and the economic activity continues, Jen will probably remain supported. Meanwhile, the euro may be under pressure from further pressure if the data on the growth of the euro area continues to solve or if the ECB signals the potential of additional rates.
Bank of Japan Faq
Bank Japan (Bij) is a Japanese central bank that establishes monetary policy in the country. His mandate consists in issuing banknotes and transferring currency control and monetary control to ensure price stability, which means the purpose of inflation of about 2%.
In 2013, the Bank of Japan began an ultra-losed monetary policy to stimulate the economy and fuel inflation in a low inflationary environment. The bank’s policy is based on quantitative and qualitative relaxation (QQE) or printing banknotes to buy assets such as government or corporate bonds to ensure liquidity. In 2016, the bank doubled its strategy and further loosened the policy, first introducing negative interest rates, and then directly controlling the profitability of 10-year government bonds. In March 2024, the boat raised interest rates, effectively withdrawing from the ultra-losing monetary policy attitude.
The huge stimulus of the bank meant that Jen was depreciated against the main currency peers. This process tightened in 2022 and 2023 due to the growing discrepancy of politics between the Bank of Japan and other main central banks, which decided to boost interest rates to fight high inflation. The BOJ policy led to the difference between the difference with other currencies, reducing the value of Jen. This trend partly turned in 2024, when the Boj decided to abandon his ultra-folk attitude of politics.
The weaker yen and the boost in global energy prices led to an boost in Japanese inflation, which exceeded 2% of the GOP. The prospect of increasing remuneration in the country – a key element driving inflation – also contributed to the move.
