USD/JPY Fundamental Daily Forecast – Japanese Retail Sales Worse than Expected

The Dollar/Yen is trading lower on Friday, which is a bit of a surprise given the continued demand for risky assets. Lower Treasury yields could be behind the move. They tend to weaken demand for the U.S. Dollar because then help tighten the spread between U.S. Government bond yields and Japanese Government bond yields.

At 11:07 GMT, the USD/JPY is trading 109.478, down 0.181 or -0.17%.

Technically, the USD/JPY continues to find support at a long-term Fibonacci level at 109.371. However, gains remained capped by the May 30 main top at 109.930. If 109.371 should fail as support then look for the selling to possibly extend into the minor 50% level at 109.109.

Japanese Economic News

In economic news, Japanese retail sales data for November released on Friday came in worse than expected. Retail Sales declined 2.1% in November as compared with a year earlier, government data showed. That was below a median market forecast for a 1.7% decline, according to Reuters. The data follows a sales tax hike that went into effect in October.

Core consumer prices in Tokyo rose 0.8% in December from a year earlier, government data showed on Friday. The core consumer price index for Japan’s capital, which includes oil products but excludes fresh food prices, compared with economists’ median estimate for a 0.6% annual rise.

Japan’s jobless rate fell and the availability of jobs held steady in November, government data showed on Friday. The seasonally adjusted unemployment rate fell to 2.2% in November from 2.4% in the previous month, figures from the Ministry of Internal Affairs and Communications showed. That compared with a median market forecast of 2.4%.

Japan’s industrial output slipped for the second straight month in November, raising the likelihood the economy will contract in the fourth quarter due to slowing demand abroad and at home. Official data showed factory output fell 0.9% in November from the previous month, a slower decline than the 1.4% fall in a Reuters forecast. That followed a downwardly revised 4.5% decline in the previous month, the largest month-on-month slump since the government started compiling the data in comparative form in January 2013.

BOJ Summary of Opinions

A Bank of Japan policymaker played down the chance of meeting a proposal by the International Monetary Fund to tweak the central bank’s 2% inflation target into a looser goal set in a range, a summary of opinions at the BOJ’s December rate review showed, reported Reuters.

As stubbornly low inflation forces the BOJ to maintain a massive stimulus program despite the strain inflicted on financial institutions, the IMF said in a policy proposal in November the BOJ could make its price goal a more flexible one by adopting a target range for price moves, according to Reuters.

The idea runs counter to BOJ Governor Haruhiko Kuroda’s pledge to continue with his “powerful” monetary easing to hit 2% inflation at the earliest date possible, Reuters said.