Japan: Activity rebound supports steady BoJ policy – ING

💡 DMK Insight

Japan’s economic data next week could shift market sentiment, especially for yen traders. A rebound in industrial production and retail sales would suggest resilience in the Japanese economy, potentially impacting the USD/JPY pair. If Tokyo CPI inflation eases as expected, it might bolster the Bank of Japan’s stance on maintaining accommodative policies. Traders should watch for how these figures align with current market expectations, as any significant deviation could lead to volatility. For instance, a stronger-than-expected retail sales figure could push USD/JPY below key support levels, prompting a short-squeeze among bearish positions. Conversely, if the data disappoints, it could reinforce bearish sentiment towards the yen, especially against the dollar. Keep an eye on the January data releases and their implications for the BoJ’s policy outlook. A shift in sentiment could create trading opportunities, particularly for those looking to capitalize on potential reversals in the yen’s value.