JPY: Mixed picture – Commerzbank

The data from Japan this morning is mixed. On the one hand, inflation rose slightly more than expected, but on the other hand, the economy is still fragile, note UOB Group FX analysts Quek Ser Leang and Lee Sue Ann.

The BoJ will not raise rates in September

“Prices in the Tokyo area rose 2.6% in August, which was above analysts’ expectations. The inflation rate for the Tokyo area is always published three weeks before the national figures, but is considered a good indicator of the national trend. However, excluding food and energy, prices rose by just 1.3% year-on-year, although this was slightly higher than the previous month’s 1.1%.”

“At the same time, the economy remains shaky. Both industrial production and retail sales fell below expectations in July, while the unemployment rate rose slightly to 2.7% from 2.5%. All in all, these data do not paint a picture of an economy in desperate need of a rate hike. On the other hand, the BoJ does not bother to emphasize that it is ready to raise rates further if the situation develops more or less as expected – which is generally true of today’s data.

“However, we believe that the fundamental picture will prevail for now and that the BoJ will not raise rates again at its next meeting in September.”