The yen has improved is showing little movement in the Thursday session. In North American trade, USD/JPY is trading at 112.90, up 0.02% on the day. On the release front, there are no Japanese events on the schedule. In the US, key indicators missed expectations. Unemployment claims jumped to 249 thousand, well above the estimate of 235 thousand. The Philly Fed Manufacturing Index slipped to 22.7 points, short of the forecast of 24.5 points. On Friday, the focus will be on housing data, with the release of Housing Starts and Building Permits.
There were no surprises from key consumer spending and inflation data on Wednesday. CPI and Core CPI matched the forecasts, with gains of 0.1% and 0.2%, respectively. Consumer spending reports were a mix – retail sales gained 0.1%, shy of the estimate of 0.2%. Core Retail Sales came in at 0.2%, beating the forecast of 0.0%. The Federal Reserve would certainly like to see higher inflation numbers, which remain well below the Fed inflation target of 2.0%. Still, the markets are very bullish on additional rate hikes, as the odds of upcoming rate hikes continues to move higher. Currently, the likelihood of a rate hike in December stands at 96%, and a January raise is priced in at 94%.
Japan recorded another quarter of growth in Q3, marking the longest economic expansion since 2001. However, Preliminary GDP came in at 0.3%, weaker than the 0.6% gain in Final GDP for the second quarter. The economy has improved in 2017, but this has not translated into higher inflation levels. Inflation remains persistently below the inflation target of around 2 percent, but the Bank of Japan has no plans to change policy. Earlier in the week, BoJ Governor Haruhiko Kuroda acknowledged the inflation issue, saying "it is not easy to quickly dispel the deflationary mindset that has formed over the course of 15 years of deflation." Kuroda added that he expects inflation levels to rise, but in the meantime the BoJ would continue its massive monetary easing, a key component of the "Abenomics" program.
