The Bank of Japan continues raising interest rates.

The Japanese yen remains stable at around 148 yen per U.S. dollar, supported by a weakening U.S. dollar amid concerns over the economic impact of escalating global trade wars. Additionally, President Trump has pledged to continue imposing additional tariffs after raising import duties on steel and aluminum, prompting the European Union and Canada to implement similar tariff increases next month. Meanwhile, the yen continues to be bolstered by expectations that the Bank of Japan will maintain its rate hikes this year, as wage growth and inflation remain on an upward trend.

Japan’s economy expanded by 2.2% year-on-year in Q4 2024, accelerating from 1.4% growth in Q3. This marks the third consecutive quarter of year-on-year growth, largely driven by a strong rebound in capital expenditures and rising public sector spending for the fourth straight quarter. Additionally, an improved trade balance has contributed significantly to Japan’s economic expansion, as exports continue to grow despite concerns over President Donald Trump’s tariff threats. Meanwhile, imports declined slightly after two consecutive quarters of growth. Private consumption rose for the third straight quarter, though at a slower pace due to higher inflation and borrowing costs.

Household spending in Japan increased by 0.8% year-on-year in January, slowing from a 2.7% rise in the previous month, as the winter bonus payment period ended. This slowdown was particularly noticeable in food expenditures, which fell by 2.4%, while spending on clothing and footwear dropped by 7.6%. Personal expenses also declined by 4.5%, marking the first monthly drop since September last year and the sharpest decline in three years.

Japan’s leading economic index, which measures economic trends for the coming months based on employment data and consumer confidence, rose to 108 in January, the highest level since October last year. This increase came as the unemployment rate edged up slightly to 2.5% in January, while employment showed a slight upward trend. The recovery in household spending has helped consumer confidence remain steady going into 2025.

Japan’s credit growth increased by 3.1% year-on-year in February, marking the strongest credit expansion in seven months. The outstanding value of credit is estimated at around 635 trillion yen, reflecting consumer spending capacity and private sector investment growth, particularly among small businesses, where credit expansion reached 0.9%.

Wages in Japan rose by 2.8% year-on-year in January, slowing from a 4.4% increase in December and falling short of market expectations of 3.2%. Meanwhile, real wages, adjusted for inflation and reflecting consumer purchasing power, declined by 1.8% in January, marking the first drop after two consecutive months of increases. This decline was due to inflation outpacing wage growth, prompting Japan’s largest labor unions to demand an average wage hike of 6%, the biggest wage increase in 30 years. On the monetary policy front, the Bank of Japan is expected to keep interest rates unchanged in its March meeting.

Techical analysis data (5H)

Resistance: 148.38, 148.6, 149

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 147.36 - 147.76 but cannot break the support at 147.76, you may set a TP at approximately 148.6 and SL at around 147.14 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 148.38 - 148.6, you may set a TP at approximately 149 and SL at around 147.36 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 148.38 - 148.6 but cannot break the resistance at 148.38, you may set a TP at approximately 147.36 and SL at around 149 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 147.36 - 147.76, you may set a TP at approximately 147.14 and SL at around 148.6 or according to your acceptable risk.

Pivot point March 13, 2025 09:10 PM. GMT+7