The Bank of Japan may raise interest rates this year.
The Japanese yen has shown a steady trend after its rapid appreciation in recent days. Investors continue to anticipate that the Bank of Japan will adopt a tighter monetary policy this year. Additionally, wage increases remain at a satisfactory level, aligning with the rapid rise in inflation. This has bolstered the case for the Bank of Japan to raise interest rates. However, the strengthening of the U.S. dollar continues to exert pressure on the yen, potentially increasing import costs and further impacting inflation rates.
Japan’s leading economic index, which measures economic trends for the coming months based on data such as job offers and consumer confidence, fell to 107.0 in November, below market expectations of 107.2. The unemployment rate remained at 2.5% in November, unchanged from its lowest level in eight months reached in September, despite a slight increase in employment during that period. Additionally, household spending continues to decline due to rising prices of goods and services. Meanwhile, consumer confidence slightly improved from its lowest level in five months in October.
Wages in Japan rose by more than 3% year-on-year in November, marking a significant increase after a 2.6% rise in October. However, real wages adjusted for inflation, a key indicator of consumer purchasing power, fell by 0.3% year-on-year in November, marking the fourth consecutive month of decline. This necessitates a careful consideration of monetary policy by the central bank. The Bank of Japan continues to prioritize wage adjustments before implementing interest rate hikes, with projections suggesting wage increases of approximately 5% by 2025.
Household spending in Japan contracted by 0.4% year-on-year in November, marking a continued decline after a 1.3% drop the previous month. This was mainly due to reduced expenses on food, fuel, household items, and clothing, which decreased by over 7.8%. However, spending on education significantly increased, rising by more than 31.9% after a decline in the previous month. Nevertheless, the increase in wages directly impacted household spending capacity as companies passed on rising costs to goods and services.
The yield on Japan’s 10-year government bonds rose to 1.25%, the highest level since 2011, amid rapidly growing investor expectations that the Bank of Japan will continue raising interest rates. Ryuzo Himino, Deputy Governor of the Bank of Japan, stated that the board must thoroughly consider rate hikes during next week’s policy meeting. They need to see a sustained increase in prices and inflation trends within the central bank’s target range. Analysts expect the Bank of Japan may revise its inflation forecast in the next meeting, paving the way for interest rate hikes this year. Additionally, Japanese government bond yields are aligning with higher U.S. Treasury yields due to robust U.S. economic data, which has dampened expectations for the Bank of Japan to cut rates this year.
Techical analysis data (5H)
Resistance: 158, 158.22, 158.51
Source: Investing.com
Buy/Long 1: If the price touches support in the price range of 157.2 - 157.49 but cannot break the support at 157.49, you may set a TP at approximately 158.22 and SL at around 156.98 or according to your acceptable risk.
Buy/Long 2: If the price breaks the resistance in the price range of 158 - 158.22, you may set a TP at approximately 158.51 and SL at around 157.2 or according to your acceptable risk.
Sell/Short 1: If the price touches resistance in the price range of 158 - 158.22 but cannot break the resistance at 158, you may set a TP at approximately 157.2 and SL at around 158.51 or according to your acceptable risk.
Sell/Short 2: If the price breaks the support in the price range of 157.2 - 157.49, you may set a TP at approximately 156.98 and SL at around 158.22 or according to your acceptable risk.
Pivot point January 14, 2025 09:56 PM. GMT+7
Name
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S3
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S2
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S1
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Pivot Points
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R1
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R2
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R3
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Classic | 156.98 | 157.2 | 157.49 | 157.71 | 158 | 158.22 | 158.51 |
Fibonacci | 157.2 | 157.39 | 157.52 | 157.71 | 157.9 | 158.03 | 158.22 |
Camarilla | 157.63 | 157.68 | 157.72 | 157.71 | 157.82 | 157.86 | 157.91 |
Woodie's | 157 | 157.21 | 157.51 | 157.72 | 158.02 | 158.23 | 158.53 |
DeMark's | - | - | 157.34 | 157.63 | 157.85 | - | - |