The USD/JPY price crashed to the lowest level since June 17th as the recent dollar momentum faded. The pair dropped to a low of 132.35, which is about 4.51% below the highest level this month.
Japan inflation is rising
The USD/JPY price dropped sharply after the latest economic data from Japan. According to the statistics agency, the headline inflation in Tokyo rose from 2.3% in May to 2.5% in June of this year. Excluding the volatile food and energy prices, inflation in the city rose from 2.1% to 2.3%.
These are important numbers since Tokyo accounts for most of the country’s economy. Also, they signal that the rising commodity prices and the weaker Japanese yen is contributing to rising prices. The soaring inflation led to a sharp decline of retail sales.
Still, Japan has an extremely low inflation rate compared to peer countries like the United States and the UK.
Additional data revealed that the labor market in Japan is still strong. The unemployment rate remained unchanged at 2.6% while the jobs to applications ratio rose from 1.24 to 1.27.
Meanwhile, the USD/JPY pair showed that the country’s industrial production jumped from – 7.5% to 8.9% in June.
The USD to JPY exchange rate dropped because analysts believe that the Federal Reserve will slam its tightening brakes earlier than expected. Besides, data by the statistics agency showed that the country slumped to a recession in the second quarter as inflation and trade deficit rose. Therefore, analysts expect that the Fed will start lowering interest rates in 2022.
The next key catalyst for the pair will be the upcoming US PCE data. Analysts expect that the inflation figure rose by over
