EURJPY has continued to post positive days and will now have Japanese inflation data ahead of Tuesday.
EURJPY – Daily Chart
EURJPY trades at 162.84, and the previous high was 16.31. If the data suits the euro, that will be the target this week.
The previous reading for the Japanese inflation number was 2.6% annually. That is above the 2% inflation rate that Western central banks target and it is a concern for Japan when the central bank owns such a large amount of debt.
Bank of Japan chief Kazuo Ueda was confident about the pricing outlook last week, saying the country is experiencing inflation, not deflation, as wage growth is expected to support the momentum. The latest reading will come on Tuesday morning at 7:30 HKT.
Ueda said that the effects of higher import costs have been slowing. However, service prices have been rising, helped by the pay hikes, which is a positive as the BOJ seeks to anchor prices near that 2% level.
Financial markets are still fixated on when the BOJ will end its hostile interest rate policy. At the same time, expectations have grown that the central bank will shift from years of loose monetary policy, which was implemented to break a decades-long deflation cycle.
“We expect an upward trend similar to the one seen until last year. In this sense, we are in a state of inflation, not deflation,” Ueda told Parliament.
The BOJ chief stressed the need to look at price developments over “a year and a half or two years” when monetary policy decisions are made, saying underlying inflation is “beginning to rise.”
“With labour market conditions tight, companies have become more proactive in setting wages. Going ahead, a virtuous cycle in which employment and wages increase while prices also rise moderately is expected to strengthen,” Ueda said.
Data from Germany later that day will be consumer confidence, with a similar reading expected from last month. Consumers are still bleak about the recession-hit economy, with a -29.0 reading expected after -29.7 from the previous month.
The euro will be in focus again on Thursday, with German unemployment and inflation set for release. Unemployment is expected to rise by 10k, while inflation is set to dip from 2.9% to 2.6% as prices continue to ease in Europe.
