Nikkei slips as yen weakens; charts show wedge, flag

The Nikkei 225 edged lower on Monday in Tokyo, trading around 69,230, down from its year-to-date high of 72,750 reached earlier this year. The USD/JPY pair rose to about 161.77 from last week’s low of 160.62.

Traders attributed the pullback to the yen’s retreat and concerns that the Bank of Japan may lag global peers in tightening policy, widening the gap with U.S. interest rates. At its last meeting the BOJ raised its policy rate by 25 basis points to 1%, the highest level in roughly 20 years. The Federal Reserve has kept its policy range at 3.50%-3.75% and signaled it may raise rates again if inflation remains elevated.

A weaker yen tends to increase the yen value of overseas sales for exporters and can make Japanese goods cheaper abroad. It raises costs for companies that import raw materials.

The BOJ has spent more than $70 billion on currency interventions so far this year. Possible actions by the central bank include direct yen purchases or further rate increases to narrow the yield gap with the United States.

Investors are awaiting a string of domestic economic reports this week. Household spending for May is due Tuesday and is forecast to fall 2.2% after a 0.5% decline in April. Current account and bank lending figures are due Wednesday, and the producer price index is scheduled for Friday, with economists forecasting headline PPI near 6.8%. Minutes from the Federal Reserve’s recent meeting are also due this week.

On technical charts, the Nikkei pulled back from the 72,750 peak to roughly the 69,200-69,300 area while remaining above its 50-day and 100-day moving averages. The daily chart shows a falling-wedge pattern and a flag-like consolidation.