From
Japan today we had inflation data for November. Inflation rates moved
solidly higher, well above the Bank of Japan 2% target level, above
expectations, and above October levels. The “core-core”
inflation rate, which strips out prices of fresh food and energy and
is the closest to the US measure of core inflation moved to its
highest level since April.

Despite
this the yen slid even lower, with USD/JPY ticking to 5-month highs
above 157.90.

Then
we had intervention type comments from Japan’s finance minister
Kato. He used forthright words such as:

one-sided
sharp
moves
speculation

which
are indicative of a greater degree of concern.

It
took some time, but eventually the yen displayed some strength, with
USD/JPY dropping back towards 157.15 and thereabouts. Its since been a little lower.

China
left its benchmark lending rates unchanged, as expected, at the
monthly fixing today.

the
one-year loan prime rate (LPR) was kept at 3.10%,
the
five-year LPR unchanged also, at 3.60%.

These
rates were last cut in October; the 1-year by 25bp from 3.35% and the
5-year also by 25bp, from 3.85%. These cuts were the largest since
the LPR reform in August 2019 and marked the third reduction in 2024.

In
other news the US government moved closer to a shutdown. A bill aimed
at furthering funding for the government, promoting Trump’s
recommendation to further expand US government debt, failed in the
House in Congress. Republicans have a majority in the House but many
disagree with fiscal profligacy and voted against Trump’s recommendation.

Still
to come is the critical US inflation data – PCE – at 8.30am US
Eastern time. There is a ‘ranges to watch’ preview above.

***

As I was posting we had more intervention type comments from Japan, this time from Atsushi Mimura, Japan’s vice finance minister for international affairs, AKA ‘top currency diplomat’. USD/JPY is little changed on these so far.

USD/JPY update: