Japanese Yen Holds Near Monthly Low Against USD Despite Strong CPI Data

Japanese Yen Near Monthly Low Despite Strong CPI and BoJ Hike Bets

The Japanese Yen (JPY) trades slightly higher but remains near monthly lows against the US Dollar (USD) on Friday during the early European session. While strong CPI data from Japan reaffirms the case for a future BoJ rate hike, the currency fails to gain much momentum due to other headwinds.

Japan’s CPI Beats Expectations

Japan’s National Consumer Price Index (CPI) for May:

• Remained above the BoJ’s 2% target, strengthening the case for policy tightening.
• Reinforced expectations of a possible rate hike by Q1 2026, though the Bank of Japan remains cautious in its approach.

Geopolitical and Trade Risks Limit JPY Upside

• Geopolitical tensions are favoring safe-haven demand, which normally supports the Yen.
• However, concerns about the impact of existing US tariffs on Japanese vehicles (25%) and other imports (24%) are weighing on sentiment.
• Markets are uncertain about Japan’s trade outlook, further limiting any JPY strength.

USD Remains Supported by Fed Outlook

• The US Dollar stays resilient, backed by hawkish Federal Reserve comments and expectations that US rates will remain elevated longer.
• This combination keeps the USD/JPY pair supported, limiting the effectiveness of safe-haven and inflation-driven Yen buying.

Key Levels and Market Focus

• Support for USD/JPY: 157.50
• Resistance: 159.80 (Monthly high)
• Watch for additional guidance from BoJ officials and US trade policy updates.

Related Reads on Tredu.com:

• BoJ Cautious Despite Inflation: What’s Next for the Yen?
• Fed vs BoJ: Diverging Paths, Converging Pressures
• Safe-Haven Currencies in Times of Global Risk