July’s inflation numbers followed the US-Japan trade deal, which will give the BoJ some clarity on levies. However, board members will likely need time to assess the effect of a sweeping 15% tariff on Japanese goods, company profits, the labor market, and the broader economy.
On Wednesday, July 23, BoJ Deputy Governor Shinichi Uchida stated that the Bank will assess the potential impact of the new trade deal on Japan’s economy and inflation. Despite the current uncertainty about tariffs and Japan’s economic outlook, the Deputy Governor signaled further rate hikes, stating:
“Given that real interest rates are at significantly low levels […] the bank, in accordance with improvement in economic activity and prices, will continue to raise the policy interest rate.”
The USD/JPY pair moved from 147.114 to 146.960 in response to the moderately softer inflation numbers.
USD/JPY Daily Outlook: Durable Goods and the US Dollar
Later in the session on Friday, US durable goods orders will provide insights into the demand environment. Economists forecast durable goods orders, excluding transport, to rise 0.1% in June month-on-month after May’s 0.5% increase.
Better-than-expected numbers could signal a robust demand environment, potentially lifting sentiment toward the US economy. An improving macroeconomic backdrop may temper bets on a Fed rate cut, potentially sending USD/JPY toward 147.5 and the 200-day EMA. On the other hand, a drop in orders may boost expectations of a September Fed rate cut, pushing the pair toward the 50-day EMA. A drop below the 50-day EMA may expose the crucial 145 support level.
AloJapan.com