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20/05/24
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JPY Lower on Japan’s Services Slipping
On Monday, the Japanese yen was lower and USD/JPY traded at about 156.12, 0.31% higher in the North American session.
March’s tertiary industry activity for Japan, a gauge of activity in the services sector, recorded the first drop this year. The index dropped by 2.4%, after gaining 2.2% in Feb. and less than the 0.1% market estimate.
The weak services data came after last week’s disappointing GDP report, with GDP in the first quarter contracting by 2%. This came after a revised 0% reading in the fourth quarter of 2023 and indicates a sluggish economy.
The Bank of Japan has indicated that it was on the path of normalizing monetary policy, which has pushed Japanese government bonds up sharply. Yields on 20- and 30-year government bonds have already reached the highest level in a decade and the 10-year yield on Monday lifted by 3.2 basis points to 0.98%, the highest level since 2013.
The BoJ was an outlier when the other major central banks were hiking rates to curb inflation, and the central is the exception again as it will likely hike rates this year while its peers will likely cut rates. Speculation is growing that the BoJ will increase rates by as many as 3 times before the end of the year.
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