Significantly, the economy contracted for the third consecutive quarter and could face a fourth quarterly contraction.

Is the weakness of the Japanese Yen affecting private consumption and the Japanese economy?

In June, Bank of Japan Deputy Governor Ryozo Himino discussed the impact of Yen weakness on the economy, saying,

“Exchange-rate fluctuations affect economic activity in various ways. It also affects inflation in a broad-based and sustained way, beyond the direct impact on import prices.”

Notably, the BoJ has remained silent on monetary policy goals after the USD/JPY spiked at a July 3 high of $161.951.

Meanwhile, US inflation remains a focal point as investors raise bets on a September Fed rate cut.

Will US consumer inflation expectations draw the interest of the Fed?

US Consumer Inflation Expectations and the Fed Rate Path

Later in the session on Monday, consumer inflation expectation numbers could increase investor expectations of a September Fed rate cut.

Economists forecast consumer inflation expectations to ease from 3.2% in May to 3.0% in June.

The Fed considers consumer inflation expectations a predictor of future inflation trends. Expectations of softer inflation could signal a pullback in consumer spending on easing fear of higher prices in the future. Downward consumer spending trends may dampen demand-driven inflation and allow the Fed to cut interest rates.

For context, consumer inflation expectations trended downward until an unexpected upswing in April. Consumer inflation expectations peaked at 6.8% in June 2022 before dropping below 4% in May 2023.