Japan's inflation continues to rise.

The Japanese yen has appreciated to around 150 yen per US dollar, despite Japan's GDP growth surpassing expectations. This growth was primarily driven by strong exports and increased domestic investment. However, higher-than-expected inflation has led the Bank of Japan (BoJ) to adopt a more hawkish monetary policy stance. Investors now anticipate that the BoJ is likely to raise interest rates again, with a possible hike in March, and another expected later in the year. Additionally, the yen has strengthened slightly as the US dollar weakened, supported by softer US economic data and easing concerns over global trade wars.

Preliminary data shows Japan's GDP grew by 0.7% quarter-over-quarter in Q4 2024, following a 0.4% increase in the previous quarter. This marks three consecutive quarters of growth, fueled by a strong recovery in business investment, which expanded by 0.5%. Domestic trade also continued to support GDP growth, with exports rising for the third straight quarter, despite risks from US tariffs. Meanwhile, imports shrank for the first time since 2024, boosting the trade balance. Government spending also showed signs of expansion, with growth accelerating to 0.3%. However, a potential interest rate hike by the BoJ could increase borrowing costs and risk deflation returning.

Japan's Producer Price Index (PPI) rose 4.2% year-over-year in January, up from 3.9% in the previous month. This marks the 47th consecutive month of rising producer inflation. Higher price pressures were seen across various sectors, including food and beverages, petroleum, and coal industries. Additionally, rising electricity costs and higher raw material prices continue to push up production costs.

Kazuo Ueda, Governor of the Bank of Japan, stated that the BoJ is prepared to increase its government bond purchases if necessary. Speaking on Friday, Ueda acknowledged recent bond yield volatility but emphasized the central bank's readiness to act swiftly to stabilize yields. He also noted that the recent rise in bond yields reflects investor expectations for Japan's economic recovery and core inflation. As core inflation remains a key driver, the BoJ may need to raise interest rates again. However, the central bank still forecasts inflation to return to its 2% target eventually. In line with its July announcement, the BoJ has also scaled back its bond purchases.

Japan's inflation rate rose to 4.0% year-over-year in January, up from 3.6% in December, marking the highest level since 2023. Food prices surged to a 15-month high, rising 7.8% from 6.4% in December, with fresh vegetables and other perishable foods driving the increase. Furthermore, electricity prices jumped over 18%, and cooking gas prices rose 6.8% following the government's decision to end energy subsidies in May 2024. Core inflation, which excludes volatile food and energy prices, also accelerated to a 19-month high of 3.2%, up from 3% in December, highlighting renewed inflationary pressures as production costs continue to climb.

Techical analysis data (5H)

Resistance: 150.66, 150.85, 151.05

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 150.07 - 150.27 but cannot break the support at 150.27, you may set a TP at approximately 150.85 and SL at around 149.88 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 150.66 - 150.85, you may set a TP at approximately 151.05 and SL at around 150.07 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 150.66 - 150.85 but cannot break the resistance at 150.66, you may set a TP at approximately 150.07 and SL at around 151.05 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 150.07 - 150.27, you may set a TP at approximately 149.88 and SL at around 150.85 or according to your acceptable risk.

Pivot point February 21, 2025 08:27 PM. GMT+7