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Japan’s inflation rate slowed for a fourth-straight month based on this morning’s release of November figures.
Core inflation, which excludes fresh food, fell to 2.7% from the previous month of 2.9%. This was in line with a Bloomberg analyst poll.
Stripping out the effects of April’s sales tax hike, core inflation was just 0.7%.
This is still quite some distance from the targeted rate of 2% and raises expectations that authorities will do more on the quantitative easing front.
There are likely to be more efforts to stimulate the economy with industrial production sliding further. The reading for November showed activity contracted by 3.8% year-on-year, worsening from the previous month’s 0.8% dip.
It also looked like not many people were in the mood for shopping. Retail sales unexpectedly fell 0.3% month-on-month; against a forecasted rise of 0.2% based on a Bloomberg poll.
Looking at USD/JPY, it appeared that traders were betting on the weak data as they put pressure on the yen heading into the release of the numbers. On the news, the pair slid indicating some covering of positions.
On a daily chart, USD/JPY is trading within an upward channel. A pullback towards the potential resistance on the lower uptrend line is a possible entry to buy, with a target at the recent high around the 122.00 handle.