The Takeaway: Japanese service sector showed improvement -> Stronger domestic demand may help achieve its 2% inflation target sooner -> USD/JPY little changed.
The Japanese Tertiary Industry Index up 1.41% in December, versus a revised -0.3% decrease in November, beating expectation set for 0.7%. In particular, demand for finance and Insurance services accounted for the most of increase. The index serves as a key indicator for domestic activity as it factors out industrial manufacturing activities which are largely affected by exchange rates and foreign demand.
The improvement in service sector could help Japan to achieve its 2% inflation target sooner than expected. Looking ahead, forex traders will focus their attentions on the Japan’s 4Q GDP that is due for release on Wednesday as well as the BOJ rate decision and G-20 meeting on Friday and Saturday respectively. Although rates are expected to remain unchanged, the appointment of the new governor remains an uncertainty for the yen as the stimulus package may occur sooner than expected under the new BOJ governor’s administration.
Earlier today, the USD/JPY slid on the misinterpretation of the G-7 statement which emphasized its commitment to market determined exchange rates. The report has little effect on the USD/JPY and it is trading at 93.363.
USD/JPY 1 Minute Chart
Charted Created by Robin Leung using Marketscope 2.0