Yen continues to weaken.
Japan has revealed that consumer spending has decreased significantly in March at the highest rate in a year, while actual wages have fallen for 12 consecutive months due to long-standing deflationary pressures. This reflects the challenges that Japan is facing in the midst of a COVID-19 recovery.
Household spending decreased by 1.9% in March compared to the previous year, while analysts expected an increase of 0.4%. This is the largest decrease since a 2.3% decrease in March of last year. Japan is still trying to control the spread of COVID-19, and when compared on a monthly basis, spending decreased by 0.8%, which is less than the expected 1.5%, and marks the second consecutive month of decline after a 2.4% decrease in February.
Household spending is expected to increase by 0.7% for the entire fiscal year 2022, slowing down from a 1.6% increase in fiscal year 2021. Actual wages fell by 2.9% in March, marking a year of decline since it began in April 2022, due to the highest inflation rate in decades.
The basic consumer price inflation rate in Japan was 3.1% in March, which is significantly higher than the target level. Meanwhile, Japan's core consumer price index (Core CPI), which excludes fresh food and energy prices rose by 3.8% in March, the largest increase since December 1981 and the highest in over 40 years.
Haruhiko Kuroda, the Governor of the Bank of Japan (BOJ), said today that the BOJ will maintain its Yield Curve Control (YCC) policy and will begin to reduce the size of its balance sheet when it becomes increasingly likely that Japan's inflation rate will sustainably reach its 2% target.
He told the Japanese Parliament that the Japanese economy is growing faster and inflation expectations remain high. He also stated that "we see some positive signs in inflation expectations and other areas" and that "once we judge that the inflation rate will sustainably reach 2% and be stable, we will end the YCC policy and then proceed to reduce the size of the balance sheet."
BOJ has set a short-term interest rate target of -0.1% and controls the yield on 10-year Japanese government bonds (JGBs) at around 0%, as part of its efforts to achieve a sustainable inflation target.
However, as the current inflation rate is higher than BOJ's target, investors speculate that Governor Kuroda may soon reduce the use of Yield Curve Control (YCC) after criticism that it has distorted market pricing and hurt the profits of commercial banks.
Technical analysis data (5H)
Resistance: 135.13, 135.37, 135.52
Support: 134.75, 134.61, 134.37
Buy/Long 1: If the price touches the support range at 134.61-134.75 but cannot break through the support at 134.75, it may be appropriate to set a TP around 135.37 and an SL around 134.37 or based on acceptable risk.
Buy/Long 2: If the resistance range at 135.13-135.37 can be broken through, it may be appropriate to set a TP around 135.52 and an SL around 134.61 or based on acceptable risk.
Sell/Short 1: If the price touches the resistance range at 135.13-135.37 but cannot break through the resistance at 135.13, it may be appropriate to set a TP around 134.61 and an SL around 135.52 or based on acceptable risk.
Sell/Short 2: If the support range at 134.61-134.75 can be broken through, it may be appropriate to set a TP around 134.37 and an SL around 135.37 or based on acceptable risk.