The USD / JPY pair rose after the release of inflation data in Tokyo for January, where the Consumer Price Index fell sharply during the month to 1.6% levels after expectations indicated a decline from 2.1% to only 1.9%, and this raises doubts about the extent of the bank's ability to tighten its ultra-loose monetary policy.
Also, subsequent data were released that corporate services inflation remained stable at its highest level for almost nine years in December.
Also today, the Bank of Japan released the minutes of the bank's December meeting, which briefly indicated the following:
- The need to patiently maintain an easy policy.
- The positive wage inflation cycle must be confirmed in order to consider ending negative rates.
- A few members said that they do not see the risk of the BOJ falling behind the curve, and they can wait for developments in the annual wage talks this spring.
- One member said that inflationary pressure in Japan is subsiding, which is important for careful scrutiny of wage and price movements
- One member said that the Bank of Japan can spend a long time determining the cycle of wage inflation because it has already addressed the side effects of YCC
- One member said that the Bank of Japan should not miss the opportunity to change its policy to prevent high inflation from harming consumption
- This member said that the risk of a significant rise in inflation and the need for a sharp monetary tightening is minimal, but if this happens the cost will be enormous.
