Japan economy: The dollar and yen exchange rate outlook is ambiguous

USDJPY appears to peak at the high $114.50 (July highs), but the medium-term outlook is somewhat ambiguous. In particular, it seems that the upward return of the market has lost its strength since the 2017 lows. Although the US NFP growth in September was negative at 33,000 units, the average household income for the third consecutive month increased and the labor force participation rate rose to 63.1 percent, he is the highest level since March 2014.

The continued improvement in the US labor market could encourage the Federal Reserve to raise interest rates in 2017, especially as the New York Federal Reserve head (from the Federal Reserve Committee voter members) said, “It is still better to continue the eliminate of gradual monetary policy expansion.”

Based on this, the latest report by the American FOMC last meeting may report new peaks for USDJPY. Because the report will certainly cover the supports of Federal Reserve members of raising interest rates. Improving the America interest rate sentiments can support from decreasing US Rate of return and Treasury yields, and increase the difference of Rate of return between US and Japan bonds. The Bank of Japan get help from the expansionary policies and measuring facilitating money to boost its economy and seeks to control the yield curve.

This week, important economic reports will be released from the United States. Optimism over US economic reports can support USDJPY. The consumer price index (CPI) is expected to grow for the fourth consecutive month in September, and the US retail index is expected to grow by 1.4%. However, it should be noted that the general outlook for USDJPY is limited.