NEWS / Foreign Exchange

Japanese core consumer prices fell more than expected in March

Japanese CPI

Japanese core consumer prices fell more than expected in March while industrial production showed a surprising drop, raising doubts about how soon the Bank of Japan could next lift interest rates.

Core CPI fell 0.3 % in March from a year ago, more than an expected 0.2 % drop, while industrial production fell 0.6 % from the previous month, compared with an expected 1.1 % rise.

Japan's seasonally adjusted jobless rate was unchanged at 4.0 % in March, while overall household spending rose 0.1 % from a year earlier. March retail sales fell 0.7 % year-onyear.

Euroyen futures jumped on Friday after soft Japanese data on consumer prices and industrial production stirred doubts about how soon the Bank of Japan could next lift interest rates. EURJPY hit a record high of 162.84 after the soft data.

EURJPY traded between 162.38 and 162.84.

Ota on Japanese economy

Japanese Economics Minister Hiroko Ota said on Friday the overall economic trend remains intact despite weak industrial output data released earlier in the day.

"Production is weak, but the broad economic trend hasn't changed," Ota told a news conference.

Asked about her view on deflation, Ota said: "The end of deflation is still in sight, but we need to make sure that there is no return to deflation."

FED??™s Yellen on U.S economy

San Francisco Federal Reserve Bank President Janet Yellen said on Thursday that while downside risks have increased and there is "some" risk of recession, the economy should strengthen in the second half of 2007.

Yellen also said flexibility in monetary policy was needed now as there were concerns about both growth and inflation. "The current stance as enunciated in the statement is basically that we are going to watch the economy," she told reporters after delivering a speech to the Money Markeeters of New York University.