The Japanese yen historically broke through the 155 level, and there may be a temporary impact on the yen before the Bank of Japan's decision is announced on Friday morning (expected around 11:00 on Friday).
According to media reports on Thursday, Morgan Stanley economists Takeshi Yamaguchi and Masayuki Inui warned that due to measures such as free high school education in the Tokyo area, there is a risk of a significant decline in the Tokyo CPI in April (to be announced at 07:30 on Friday).
The official in charge of Tokyo CPI data stated in an interview with the media on Thursday that officials are still considering how to reflect the impact of free high school tuition in the data.
Currently, the market generally expects that the April CPI in Tokyo will further decline, with the year-on-year CPI expected to slow from 2.6% to 2.5%, and the year-on-year core CPI growth rate expected to slow from 2.9% to 2.8%.
According to the analysis of Takeshi Yamaguchi and Masayuki Inui, the high school tuition factor may cause the Tokyo core inflation data to drop by about 0.7 percentage points, resulting in actual results well below 2%. They warned:
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As the data will be released on the morning of the Bank of Japan's monetary policy meeting announcement (around 11:00 on Friday), we will pay attention to the risk of a possible brief reaction in the foreign exchange market. Since this high school tuition exemption measure only covers the Tokyo area, the impact on national inflation data should be limited.
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Analysis from Morgan Stanley pointed out that even if the CPI data for the Tokyo single region shows a significant decline due to one-off factors, it is unlikely to change the Bank of Japan's policy stance. However, it may deepen traders' view that monetary easing will continue, thereby increasing the pressure for yen depreciation.
The USD/JPY exchange rate broke through the historical 155 level overnight, for the first time since June 1990, and has further risen to 155.64, causing concerns in the market about Japan's authorities intervening in the foreign exchange market in the near future. Japanese officials warned market participants again on Thursday that they are closely monitoring the exchange rate trend.
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Due to measures such as free high school tuition in the Tokyo area, Morgan Stanley expects that the core CPI in Tokyo will plummet significantly in April, thereby increasing the pressure for the depreciation of the Japanese Yen

After falling below 155, Morgan Stanley warns: tomorrow morning is a crucial moment for the Japanese Yen