Japanese Yen crosses staged a strong recovery this week as the Bank of Japan leaves interest rates unchanged for another month. They are committed to normalizing interest rates, but always seem to have their hands tied either by the government or in this case, financial market conditions.
The sharp rise in the corporate service price index in the month of July indicates that the country is slowly escaping deflation and validates their need to raise rates. We will get more evidence to confirm or deny that in the week ahead with retail sales, consumer prices, unemployment, PMI and industrial production due for release along with the minutes from last month?s monetary policy meeting. Although important, they will probably have a far smaller impact on the Yen than the market?s overall appetite for risk.