Yen Threatened by Deflation

The Japanese yen fell against the euro today as demand for a safe haven waned, while investors feared that Japan remains under threat of deflation.

It looks like the speculations about the ESM getting a banking license brought the Forex market away from a fear mode. That is not good for the yen, which also suffers from deflation in Japan. The Corporate Services Price Index (which is considered a leading indicator of consumer inflation as higher costs for corporations are usually passed on to the consumer) fell 0.3 percent in June from May, when it rose 0.1 percent. Tomorrow’s inflation reports are also expected to be bad.

EUR/JPY advanced from 94.92 to 95.86 as of 11:23 GMT today. USD/JPY was little changed at 78.17.

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