Inflation figures from the Tokyo area for December were broadly in line with expectations. The figures provide little hope that the Bank of Japan will soon implement a turnaround on interest rates.

In the medium term, further disinflation in Japan is not exactly positive for the Yen. Even the strong global inflation shock, coupled with a significant depreciation of the JPY, has not led to a sustainable re-inflation. I, at least, find it hard to imagine what else needs to happen to achieve that goal. 

Of course, it is still possible that the BoJ will make a symbolic exit from its negative interest rate policy in the coming months. But in my opinion, given the inflation trend, not much more is to be expected. Yen exchange rates are therefore likely to remain largely dependent on global monetary policy developments.