It was always going to be a race against time for the BOJ in the first half of this year. And the inflation data today reaffirms that sentiment, with prices converging further towards the pivotal 2% mark. Where art thou inflation?
The headache for the BOJ continues as such. They managed to squeeze in a rate hike in March but are struggling to follow that up.
The earlier thinking was that they might act in June or possibly July. But now, the narrative has shifted to the BOJ potentially moving in September next. It is a case of kicking the can down the road.
Policymakers are still presenting the argument that eventually, prices will start to turn higher again in 2H 2024. Their belief stems from the supposed "virtuous cycle" that has been formed alongside higher wages in the past two years. But it is best to be reminded that this has been a spot that has struggled for traction for over two decades in Japan.
And that is not to mention that they are swimming against the current here. All the other major central banks are arguing that inflation pressures are to come down further going into 2025. So, there's that.
The longer that the data continues down this trend, the harder it will be to justify the BOJ's conviction. And that is ultimately what is weighing on the yen, and will continue to do so in the bigger picture.
USD/JPY is now rising back up closer to 159.00 today, with watchful eyes on Tokyo intervention once again.