The Bank of Japan continues ultra easy monetary policy.

Japanese yen continues to depreciate steadily, with the latest exchange rate exceeding 148 yen per dollar. This is due to the Bank of Japan's confirmation that it will maintain its interest rates. Additionally, Japan's economic indicators have not been very favorable, putting significant pressure on the yen. Although the U.S. economy hasn't been performing exceptionally well either, holding onto the dollar is currently seen as a much better option.

The Bank of Japan (BoJ) has kept its short-term interest rates at -0.1% and continues to target a 10-year government bond yield of around 0%. In its September meeting, the BoJ also stated that it would continue with monetary easing measures, focusing on economic growth while keeping the inflation target at 2%. Additional easing measures may be implemented if necessary.

Japan's inflation rate has decreased to 3.2% year-on-year (YoY) in August, down from 3.3% in the previous month. Notably, food prices have continued to rise steadily, increasing by as much as 8.6% compared to the previous year, marking a 24-month consecutive increase. Japan heavily relies on food imports, and with the weakened yen, food prices have become unavoidably higher. On the other hand, fuel, electricity, and water prices have been decreasing rapidly. Although the decreases in water and electricity prices may not be as significant as the increase in food prices, they do contribute to supporting some of the expenses.

The Core Consumer Price Index (Core CPI), which excludes fresh food but includes fuel costs, increased by 3.1% on a year-on-year basis. This figure surpasses the Bank of Japan's (BoJ) 2% target, indicating that the accommodative monetary policy, including yield curve control (YCC), has made it increasingly challenging to manage inflation and bring it back to the target level. Despite the use of YCC, controlling inflation has proven difficult.

In September, the Manufacturing Purchasing Managers' Index (PMI) decreased to 48.6, primarily due to a significant contraction in both production and new orders. Meanwhile, there was an increase in hiring, and raw material prices saw a substantial uptick, reaching their highest level in four months.

The Services PMI also decreased to 53.3 in September. The decline was attributed to a reduction in the number of new business openings, leading to a decrease in hiring. Additionally, foreign demand decreased for the first time in 13 months, contributing to a decrease in consumer confidence.

Techical analysis data (5H)

Resistance: 148.96, 149.04, 149.17

Support: 148.75, 148.62, 148.53

Source: Investing.com