JPY is falling faster. Overview for 19.05.2023

The Japanese yen paired with the US dollar has accelerated the pace of devaluation. The current quote is 138.17.

The yen was declining faster but fresh price statistics stopped its fall. For example, annual inflation in Japan increased by 3.5% in April from 3.2% a month before. The CPI rose by 0.6% m/m after growing 0.4% m/m in March.

Core inflation in April stood at 3.4% y/y, which was in line with the forecast. On a monthly basis, the index rose by 0.7%.

What do we see here? Overall inflation has accelerated despite downward expectations. This poses a challenge for the Bank of Japan: what if the cost pressures on companies and consumers do not disappear by the end of the year as the regulator expects? What if prices continue to rise steadily? Then the BoJ will be forced to cancel its ultra-soft monetary policy.

Meanwhile, the yen remains near its six-month lows under the influence of the US dollar. Demand for the USD is high due to the risks associated with the US debt ceiling.