The Japanese Yen (JPY) saw a decline during the Asian trading session on Friday, following the release of Japan’s inflation data. The Statistics Bureau of Japan reported that the annual National Consumer Price Index (CPI) showed a slowdown in February, impacting the currency's performance. The YoY CPI reading, which compares prices to the same month a year earlier, is a critical indicator for the Japanese Yen. A higher reading typically strengthens the Yen, while a lower reading has the opposite effect.
The nationwide core CPI, excluding volatile fresh food prices, increased by 3% from a year earlier. This was slightly above market expectations of 2.9% but below January’s 3.2% growth. This data suggests a modest easing in inflationary pressures in Japan, influencing the Bank of Japan's (BoJ) monetary policy outlook.
Inflation Data and BoJ's Position
The National Consumer Price Index is a vital measure of inflation, gauging price changes in goods and services purchased by households. The recent data release indicates a deceleration in inflation, which could impact the BoJ's future policy decisions. BoJ Governor Kazuo Ueda remarked on the need to act proactively, aligning with previous economic forecasts.
"The Shunto result is largely in line with our January view and the central bank wants to conduct policies before it is too late," Ueda stated earlier this week.
Despite this, the central bank is expected to maintain its accommodative stance, adjusting the degree of easing as necessary to meet economic and price objectives. The BoJ has revised its growth outlook downward, reflecting uncertainties surrounding international trade dynamics.
US Dollar Recovery and Market Reactions
Meanwhile, the US Dollar (USD) is rebounding from its recent lows, supporting the USD/JPY currency pair's recovery. The Federal Reserve has signaled potential rate cuts, with Fed Chair Jerome Powell highlighting economic risks posed by tariffs.
"Tariffs are likely to dampen economic growth," Powell noted in a recent address.
The USD/JPY pair experienced an upswing after touching a weekly low near 148.28-148.15 on Thursday. During Friday's session, the pair moved back above 149.00, with immediate resistance identified around the 149.25-149.30 range.
Outlook for USD/JPY Pair
Traders are monitoring the USD/JPY pair closely as it builds momentum from its overnight bounce. The pair’s performance is influenced by both domestic Japanese factors and broader international monetary policy developments. The ongoing recovery of the US Dollar adds pressure on the JPY, potentially pushing the currency pair higher.
The Asian session saw the USD/JPY pair hitting lows around 148.60-148.55 before recovering. Analysts suggest that these movements indicate potential for further gains, contingent on economic indicators and policy announcements from both Japan and the United States.