A worsening economic backdrop, declining consumer spending and a lack of progress in the desired wage-price spiral hampers the BoJ amid future rate hikes
Indices Update: As of 10:00, these are your best and worst performers based on the London trading schedule: US 500: 0.23% Wall Str...Headline inflation in Japan dropped to 2.5% when compared to April last year, down from 2.7% in March. Additionally, the core measure dropped from 2.6% to 2.2% as expected. The reading that strips out volatile items like fresh food and energy also noted a decline from 2.9% to 2.
Economic activity is relied upon to stimulate growth and pave the way towards another rate hike but if consumers are retreating it becomes very difficult to tighten financial conditions. Therefore, it may be a while longer before the BoJ attain the necessary confidence to hike interest rates again with the market pricing in a potential 10 basis point hike in July with a total of 25 basis points for the year.
Less than one month after it was suspected that Japanese officials intervened in the FX market, USD/JPY now trades closer to the 160 marker that set the process into action. However, the grind higher has been gradual, not exhibiting the same volatility that prompted officials into action.
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