USD/JPY Faces Pressure Below 147.00 Amid Tokyo CPI Data Release

The USD/JPY pair has softened to around 146.85 in the early Asian session on Friday, following the release of Japan’s Tokyo August Core CPI data. The Japanese Yen (JPY) gained ground against the US Dollar (USD) after Tokyo’s inflation report matched expectations.

Japan’s Tokyo CPI report showed a year-on-year rise of 2.6% in August, slightly lower than the previous 2.9%, while Tokyo’s core CPI inflation eased to 2.5% from 2.9% in July, aligning with market forecasts. Meanwhile, Tokyo’s CPI excluding fresh food and energy rose 3.0% YoY, compared to the prior 3.1%. This data reinforces expectations of a possible interest rate hike by the Bank of Japan (BoJ), boosting the Japanese Yen in the near term.

The market sentiment has shifted with rising hopes of a resumption in BoJ rate hikes. A Reuters poll indicated that nearly two-thirds of economists foresee the BoJ increasing its key interest rate by at least 25 basis points later this year.

Meanwhile, the US Dollar remains somewhat supported after stronger-than-expected US GDP growth. The US economy expanded at a 3.3% annualized rate in Q2, marking a quicker pace than initial forecasts, thanks to increased business investment and a trade boost.

Market participants are awaiting the US Personal Consumption Expenditures (PCE) Price Index report later on Friday. This data will be crucial in shaping expectations for the Federal Reserve’s stance in the upcoming September policy meeting. The headline PCE is projected to increase by 2.6% YoY in July, with core PCE expected to rise 2.9% during the same period. These numbers will likely determine the next move for the USD and influence Fed rate decisions.

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