JPY – Frequent statements from officials expressing concern about the yen's weakness trigger a rebound

Japanese industrial production declined for the second consecutive month, hampered by production disruptions caused by an earthquake in southern Japan and manufacturers continuing to grapple with high costs stemming from the Middle East conflict. Data released Wednesday by Japan's Ministry of Economy, Trade and Industry showed that industrial output fell 1.7% in August compared to July, while economists had expected a 1.3% increase. Year-on-year, industrial output rose 3.4% in August, lower than the market consensus of a 6.8% increase. The data was partly influenced by the 7.1 magnitude earthquake that struck southwestern Japan's Kumamoto Prefecture on July 28.

The dollar fell below the 157 level against the yen in early trading on Wednesday, influenced by repeated currency warnings from the Japanese government and end-of-quarter capital flows. Japan's top currency official, Jun Mimura, said on Monday that the Japanese prime minister, finance minister, and the US had recently sent "very clear" signals regarding the yen's depreciation. Prime Minister Sanae Takaichi had previously stated that during her meeting with US President Trump last week, Trump expressed concern about the yen's weakness.

The USD/JPY pair traded volatilely this week, fluctuating around 157. Technical charts show initial signs of a pullback in the RSI and Stochastic Oscillator, suggesting a potential short-term correction, especially given last week's failure to break above the 50-day moving average. Two resistance levels to watch are the 50-day moving average at 158.30 and the 160 level. A significant move above these levels is expected in the short term, but a break above them could extend the technical target to 160.80 and 161.50. Support levels are expected at 156.50 and 156, with key levels at 155 and 154.20, and the next key level at 153.50.

Forecasted range:
Resistance 158.30* – 160.00* – 160.80 – 161.50
Support 156.50 – 156.00 – 155.00 - 154.20 – 153.50

This Week's News Highlights:
28/9 Japan August Corporate Services Price Index YoY +3.7%
29/9 Japan July Leading Indicator 117.7
Japan July Coincident Indicator 120.6
30/9 Japan August Retail Sales MoM -1.2%
Japan August Retail Sales YoY +2.7%
Japan August Large Retailer Sales YoY +1.0%
Japan August Industrial Production MoM (Preliminary) -1.7%
Japan August Industrial Production YoY (Preliminary) +3.4%

Focus:
Thursday Japan Q3 Tankan Report (07:50)
Japan September Manufacturing PMI (08:30) Japan's September Household Consumer Confidence Index (13:00)

Friday: Japan's September Tokyo CPI (07:30)
Japan's September Unemployment Rate (07:30)

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