Jibun Bank's manufacturing PMI may affect the US dollar against the Japanese yen, as a rise above 50 could boost demand for the yen and expectations of interest rate hikes. Economists believe that the soaring inflation in Tokyo may lead to the Bank of Japan raising interest rates in October, thereby affecting the trend of the US dollar/Japanese yen. As investors focus on a possible 50 basis point rate cut in September, the Federal Reserve's comments on employment and inflation may affect the USD/JPY exchange rate.

Focus on Jibun Bank Manufacturing PMI

On Monday, September 2nd, the final manufacturing PMI data may affect the US dollar to Japanese yen exchange rate.

According to preliminary investigations, Jibun Bank's manufacturing PMI rose from 49.1 in July to 49.5 in August.

If revised upwards to above 50, it may boost demand for the Japanese yen. The manufacturing industry accounts for approximately 20% of the Japanese economy. The increase in manufacturing activity may strengthen the Japanese economy and raise expectations that the Bank of Japan will raise interest rates in the fourth quarter of 2024.

Experts' views on the Japanese economy and the path of the Bank of Japan's interest rates

Pan, Deputy Director of Economics at Standard&Poor's Global Market Intelligence, said in a preliminary survey of the private sector, "The August PMI preview values indicate that the business activity of Japanese private enterprises will continue to expand strongly until the mid-2024. The accelerated expansion of service industry activity supports growth, while manufacturing output has resumed growth after a brief decline in July

Taro Kimura, an economist at Bloomberg Economics, responded to the inflation data released in Tokyo last Friday, reportedly saying, "The astonishing surge in inflation in Tokyo in August will definitely catch the attention of the Bank of Japan, and we believe this will lead to discussions on interest rate hikes at the October meeting. The report provides clear evidence that steady wage increases are affecting consumer prices

The upward correction of Jibun Bank's manufacturing PMI and speculation of the Bank of Japan raising interest rates in the fourth quarter of 2024 may push the US dollar to fall below 145 against the Japanese yen.

US Economic Calendar

Investors should pay attention to the comments from the Federal Reserve later on Monday. Comments on the US labor market, inflation, and the path of Federal Reserve interest rates may affect demand for the US dollar.

According to market forecasts, investors expect the Federal Reserve to cut interest rates by 25 basis points in September. The Federal Reserve supports a 50 basis point interest rate cut to boost the US labor market, which could mean the US dollar falling below 145 against the Japanese yen.

According to the Chicago Mercantile Exchange's Federal Reserve Watch Tool, the likelihood of the Fed cutting interest rates by 50 basis points has decreased from 36.0% on August 23 to 30.0% on August 30.

Friday's US employment report may be crucial for the September interest rate decision. The rising unemployment rate and slowing wage growth may intensify the bet on a 50 basis point interest rate cut by the Federal Reserve.

Experts' views on the path of Federal Reserve interest rates

AMP's head of investment strategy and chief economist Shane Oliver said about last Friday's inflation data, "The core PCE deflator in the United States slightly weakened in July, with a month on month rate of 0.16%/year on year rate of 2.6%. This makes it possible for the Federal Reserve to cut interest rates in September, and in the absence of significant weak employment, the Fed's rate cut looks like 0.25%

Short term forecast: bearish

The trend of USD/JPY will depend on Japan's private PMI, wage growth, and household expenditure data.

Positive data may boost bets on the Bank of Japan's Q4 2024 interest rate hike and yen demand, but US service PMI and US labor market data also need to be considered. Weaker service industry activity and job market conditions may increase bets on a 50 basis point Fed rate cut in September. A more moderate path for Federal Reserve interest rates may suggest that the US dollar may fall towards 140 against the Japanese yen.

Investors should remain vigilant, monitor real-time data, central bank insights, and expert comments to adjust their trading strategies accordingly. Keep up-to-date with the latest news and analysis to manage the volatility of USD/JPY.

USD/JPY daily chart