Article by ForexTime

Japan’s unemployment rate hit its lowest level in 20 years. Unemployment fell unexpectedly from 3.4 per cent to 3.1 per cent, its lowest level since 1995 and a sign of growing tightness in the labour market.

The data is good news but other data that were released were not as good, especially inflation numbers, which the Bank of Japan closely watches when it decides on monetary policy.

The headline CPI number showed that overall prices were up 0.3 per cent on a year ago against 0.2 percent forecast. Core CPI excluding fresh food fell 0.1 percent from a year earlier (-0.1 percent forecast) following declines in September and August. However, the so-called Core Core CPI, which excludes energy and all food, rose 0.7 percent (0.8 percent forecast).

While Core CPI is the Bank of Japan’s gauge for measuring progress toward its 2 percent inflation goal, Core Core CPI may give more clues to any changes for monetary policy. It has shown rising prices since October 2013, supporting the argument by Governor Haruhiko Kuroda that the underlying trend in inflation is improving, once you strip out the impact of lower oil costs.

Markets interpret that deflation risks are no longer that great and this would reduce the likelihood of more stimulus (QE) by the Bank of Japan. This is positive for the yen which gained after the data this morning.

Article by ForexTime

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