9 Jan 2014
Flash: Inflation data hints at weaker Yen - Nomura
FXstreet.com (Bali) - Japanese inflation momentum points to JPY weakness continuing, notes Yujiro Goto, FX Strategist at Nomura.
Key Quotes
"November core CPI inflation reached +1.2%, its highest level since October 2008. Core-core inflation excluding energy and food also accelerated to +0.6%, its highest level since mid-1998. 10yr inflation expectations based on the Quick bond investors survey also accelerated to 1.45% in December from 1.34%."
"Thanks to higher inflation expectations, Japanese real 10yr yields continued to fall in December, even though nominal yields have risen slightly recently. By contrast, US real yields have been gradually rising, thanks to the recent Fed decision to start tapering. A widening real yield differential justifies the recent rise in USDJPY."
"We expect the real yield differential to continue widening gradually, as the direction of monetary policy in the US and Japan will likely diverge in 2014."
"Inflation momentum can slow mid-2014, but the slowdown should encourage the BOJ to ease monetary policy again, limiting downside risk for USDJPY. “Kuroda put” will stay on the table throughout 2014."
Key Quotes
"November core CPI inflation reached +1.2%, its highest level since October 2008. Core-core inflation excluding energy and food also accelerated to +0.6%, its highest level since mid-1998. 10yr inflation expectations based on the Quick bond investors survey also accelerated to 1.45% in December from 1.34%."
"Thanks to higher inflation expectations, Japanese real 10yr yields continued to fall in December, even though nominal yields have risen slightly recently. By contrast, US real yields have been gradually rising, thanks to the recent Fed decision to start tapering. A widening real yield differential justifies the recent rise in USDJPY."
"We expect the real yield differential to continue widening gradually, as the direction of monetary policy in the US and Japan will likely diverge in 2014."
"Inflation momentum can slow mid-2014, but the slowdown should encourage the BOJ to ease monetary policy again, limiting downside risk for USDJPY. “Kuroda put” will stay on the table throughout 2014."