Speaking yesterday, the governor of the Bank of Japan Kazuo Ueda said:
- There is no change in the outlook for Japan despite the contraction of GDP in the first quarter.
- The contraction of GDP in Japan in the first quarter is largely due to a decrease in automobile production and the impact on consumption and exports.
- Our view on the world economy has not changed much since the Bank of Japan's policy meeting in April.
- The biggest focus regarding external risks will be whether the US economy will make a soft landing.
- I do not see any new risks regarding the external economic outlook.
On the other hand, Japanese inflation data was released this morning, as the consumer price index excluding fresh food fell to 2.2% annually in April from 2.6% in March.
Undoubtedly, the slowdown in the Consumer Price Index for the second month in a row, approaching the levels of 2.0%, reduces inflationary pressures on monetary policy makers at the Central Bank of Japan.
These data reduce the likelihood that the Central Bank of Japan will raise interest rates again, after it raised interest rates for the first time since 2007 at last March's meeting.
We expect the dollar to rise against the yen to the levels of 158.00 and then 159.20, as the rise in the US dollar and bond yields from the US reinforces the need for the Japanese authorities to intervene in the foreign exchange market to protect the local currency from excessive weakness, especially if we approach the psychological barrier 160 again.
