Morning Brief – Japanese Inflation Watch

The market focused on Japanese inflation during the Asian session, however, the USDJPY pair showed only a muted reaction to above 3 percent inflation in Japan.

The annual inflation rate in Japan inched lower to 3.2% in March 2023 from 3.3% in the previous month. This was the lowest point since last September as transport cost rose the least in 6 months.

In addition, prices of fuel, light, and water charges dropped much faster, mainly due to electricity (-8.5% vs -5.5%). On the other hand, inflation was unchanged for housing (at 1.3%), clothes (at 3.6%), education (at 0.9%), and miscellaneous (at 1.3%). Also, cost of food increased the most since September 1980.

Core consumer prices went up 3.1% yoy, the same pace as in February, which was the least in 5 months, matching forecasts but above the Bank of Japan’s 2% target for the 12th straight month. On a monthly basis, consumer prices rose by 0.3% in March, shifting from a 0.6% fall in February.

The Bank of Japan are set to meet next week, and speculation is about the place that new governor Ueda will strike quickly with a move to reduce policy stimulation after they abandoned YCC.

Russia was also in traders’ radar after on Thursday after Bloomberg reported that the US and Ukraine’s allies were considering “an outright ban on most exports to Russia“.

Kyodo news agency in Japan have reported this morning that Group of Seven countries are considering the same, a near-total ban on exports to Russia. Kyodo citing Japanese government sources for its information.

Japan’s Chief Cabinet Secretary Hirokazu Matsuno was asked about the Bloomberg report “What is important for ending Russian aggression as soon as possible is that G7 remains united for severe sanctions against Russia and strong support for Ukraine.“