US Treasury bought yen in July; Fed made no solo FX interventions in Q3
Japan wholesale inflation speeds up to 7.1%, beating forecasts and firming BoJ hike bets
The upside surprise adds to the case for a Bank of Japan hike in December. It should give the yen some support at the margin, although a Fed that is also on a hiking path after a hot US CPI limits how much the rate gap narrows. Oil is the key swing factor, because crude and fuel imports drove most of October’s import price jump. Any further rise in energy prices tied to the Iran war would feed directly into Japan’s pipeline inflation and strengthen the hawks’ argument. For Japanese government bonds, a firmer inflation backdrop keeps upward pressure on yields. For equities, rising input costs are a risk to margins for manufacturers that cannot pass them on. --- Cheap rice is masking it, but energy, materials and a weak yen are pushing Japan’s pipeline inflation higher again, and that leaves little reason for the BoJ to wait. Summary: Japan’s corporate goods price index rose 7.1% y/y in Oc
