AUD/JPY Recovers 94.00 Despite Stronger Than Expected Japanese Retail Trade

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  • AUD/JPY recovered 94.00 despite Japanese retail outperforming.
  • Retail trade landed 3.6% and 0.6% on an annual and monthly basis.
  • Underperformance is expected from Australian retail sales data.

AUD/JPY refreshed its intraday low at 93.92 but recovered to the critical level of 94.00 despite Japan’s Ministry of Economy, Trade and Industry announcing a retail trade robust. Annual retail trade landed at 3.6%, well above expectations and the older version of 3.3% and 2.9%, respectively. While monthly economic data came in at 0.6%, higher than estimates of -0.1% but lower than the previous print of 1%. Sales at large retailers climbed 8.5%, well above the forecast of 1.3% and the previous impression of 4%.

Robust retail data indicates that consumer spending has increased significantly and ultimately overall household demand. There is no doubt that the Bank of Japan (BOJ) will continue its ultra-accommodative monetary policy in its upcoming monetary policy meetings despite the strong economic data and the higher inflation rate, as it broke through the desired levels of significantly.

Last week, the Japanese economy released Japan’s National Consumer Price Index (CPI) at 2.5%, while the National Core CPI, which excludes food and energy prices , landed at 0.8%. It should be noted that the inflation rate of the Japanese economy is mainly driven by soaring food and energy prices. The BOJ will stick to its cautious monetary stance until it finds that solid wage growth and firmer aggregate demand have become the real catalysts for boosting the rate of inflation.

On the Australian front, investors are focused on the Australian Bureau of Labor Statistics’ retail sales release. A preliminary estimate of economic data is 0.4%, lower than the previous release of 0.9%. This indicates that consumer spending remained weaker in the previous month, which could be the result of weaker wage growth in line with higher price increases. This could be a reflection of a lower rate of inflation or lower overall aggregate demand.

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