Tokyo Core CPI Better Than Expected

While not one of the more commonly quoted figures, the Tokyo Core CPI numbers are one of my favorites as it shows the price of goods and services that people in Tokyo deal with. This is excluding fresh fruit, which is very volatile in a nation that happens to import a lot of it. However, Tokyo is without a doubt the epicenter of all things economically related to Japan, and as such this can give us a little bit of a sneak peek into exactly how the Japanese economy is doing.

The release came out at -0.5% according to the Ministry of Internal Affairs and Communications for the year-over-year number. This was better than the expected -0.6%, but should still put a punctuation mark on the deflation that we continue to see in Japan two decades later.

Because of this, it appears that the Bank of Japan will continue to keep monetary policy very easy. This should be a surprise anybody trades FOREX, but this is just simply another "nail in the coffin" as there is absolutely no reason whatsoever to tighten policy.

This leads me to believe that eventually we will see a civilization of the markets and a return to the days of the "carry trade" as soon as the rest of the world can get its collective act together. The Japanese yen still looks like an excellent possibility for a funding currency, but we need the Europeans and to a lesser extent the Americans to get their act together.

Going forward, you can expect the Bank of Japan to continue the purchase JGBs, or Japanese Government Bonds in massive amounts in order to so-called a lot of the debt that the Japanese government continues to build. In a deflationary environment, it is probably the best thing the central bank will be able to do.