USDJPY Marches Toward 160, As Japanese Economy and Inflation Slow

USDJPY broke above another major level yesterday, pushing above 156 as the march toward 160 continues, and last night’s Japan GDP and Price Index showed a slowdown in Q3, further supporting the buying momentum in this forex pair.

The USD/JPY pair experienced a substantial decline over the summer, falling by more than 20 cents and dropping below the 140 level. Since then, however, it has rebounded, gaining over 16 cents after the break of the 156 level yesterday. The 20-day moving average on the daily chart has provided support during recent pullbacks.

USD/JPY Chart Daily – The 20 SMA Has Turned Into Support

Strong U.S. fundamentals continue to bolster this pair’s upward trend, independent of support from the Bank of Japan or Japanese economic indicators. Recent U.S. data, such as the unemployment claims report, showed the labor market remains resilient despite challenges from hurricanes, labor strikes, and election season. This week’s CPI and PPI inflation reports also showed an uptick for October, supporting the dollar’s strength.

In contrast, Japanese economic data does not suggest the Bank of Japan will implement a rate hike, further pressuring the yen. Japan’s Q3 economic data reflects weak consumer spending, declining household expenditures, and slowing profit growth. This trend was reinforced by last night’s Q3 GDP report, which painted a cautious outlook for the Japanese economy.

Japan Q3 GDP and Price Index Report

• GDP QoQ: 0.2%, meeting the 0.2% estimate
• GDP Annualized: 0.9%, above the 0.7% estimate
• Previous Quarter (Annualized): 2.9%

Capital Expenditures

• Q3: -0.2%, matching the -0.2% estimate
• Previous Quarter: +0.8%

Private Consumption (Preliminary)

• Q3: 0.9%, significantly above the 0.2% expected
• Previous Quarter: 0.9%

External Demand

• Q3: -0.4%, below the expected 0.1%
• Previous Quarter: -0.1%

Statements from Japan’s Finance Minister Kato

• Policy on FX: Japan will take action against excessive FX volatility, especially one-sided or sharp moves.
• FX Market Stability: Emphasis on FX rates reflecting economic fundamentals, with government scrutiny on speculative activity.

USD/JPY Live Chart