Asian Stocks Rise, Yen Falls Ahead of U.S. Inflation Data

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Asian stocks advanced on Tuesday, November 14, 2023, as investors awaited the release of the U.S. inflation data for October, which could have significant implications for the global monetary policy outlook. The Japanese yen, meanwhile, dropped to its lowest level in more than a year against the U.S. dollar, reflecting the diverging expectations between the Federal Reserve and the Bank of Japan.

The U.S. consumer price index (CPI) for October is expected to show a 0.6% month-on-month increase and a 5.8% year-on-year rise, according to a Reuters poll of economists. The data, due at 1330 GMT, could influence the Fed’s decision on when and how fast to taper its $120 billion per month bond-buying program and raise interest rates, which are currently near zero.

The Fed has signaled that it will start reducing its asset purchases this month and end them by mid-2024, while also indicating that it could hike rates as soon as next year if inflation remains persistently high. The Fed’s hawkish stance has boosted the appeal of the dollar and U.S. Treasury yields, which have risen to their highest levels since June.

The Japanese yen, on the other hand, has lost ground against the dollar, as the Bank of Japan (BOJ) has maintained its ultra-loose monetary policy stance, with a negative interest rate and a massive bond-buying program. The BOJ has also reiterated its commitment to achieving its elusive 2% inflation target, despite the fact that Japan’s core CPI, which excludes fresh food prices, fell 0.7% year-on-year in September.

The yen fell to 115.12 per dollar on Tuesday, its lowest level since June 2020, as investors sought higher-yielding currencies amid rising risk appetite. The yen could weaken further if the U.S. inflation data comes in higher than expected, or if the BOJ keeps its policy unchanged at its next meeting on November 18-19.

A weaker yen could have both positive and negative effects on the Japanese economy, which is recovering from the impact of the COVID-19 pandemic. On the one hand, a weaker yen could boost Japan’s exports and corporate profits, as well as increase the attractiveness of Japanese assets for foreign investors. On the other hand, a weaker yen could also raise the cost of imports and energy for Japan, which relies heavily on foreign sources for its oil and gas needs. This could erode the purchasing power of consumers and businesses, and put upward pressure on inflation.

Japan’s Finance Minister Taro Suzuki said on Tuesday that he will continue to take necessary steps on foreign exchange moves, in line with the G7 and G20 agreements. Suzuki’s remarks came after the yen fell to a 17-month low against the dollar, raising concerns about the impact of a weaker currency on Japan’s export-reliant economy.

Suzuki said that he will closely monitor the market movements and the effects of the COVID-19 pandemic on the economy, and that he will work with the BOJ and other relevant ministries to ensure economic stability and growth.


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