USD/JPY stabilises near 163.90 during the early hours of the Asian trading session on Friday. Japanese CPI inflation increased to 1.7% year-on-year in June, up from 1.5% in May. Trump pledged to impose consequences on Iran in response to the Houthi assaults in the Red Sea. The USD/JPY pair remains stable around 163.90 in the early hours of the Asian session on Friday. However, the Japanese Yen remains near a multi-decade low against the US Dollar. The preliminary readings of the US S&P Global Purchasing Managers Index are set to be released later on Friday.
Data released by the Japan Statistics Bureau on Friday indicated that Japan’s National Consumer Price Index inflation increased to 1.7% year-on-year in June, up from 1.5% in May. Meanwhile, the core CPI registered at 1.6% YoY in June, compared to 1.4% previously. The figure aligned with the market consensus. This marks the initial increase in core inflation since March. The “core-core” inflation rate, which excludes prices of fresh food and energy, decreased to 1.7% year-over-year in June, down from the prior reading of 1.8%. This figure marked the lowest level since August 2022.
This reading arrived merely days ahead of the Bank of Japan policy meeting, where it is broadly anticipated that the central bank will maintain its current interest rates. Japan’s National CPI inflation report has minimal effect on the JPY, as traders remain vigilant regarding potential intervention from Japanese authorities. Finance Minister Satsuki Katayama on Wednesday cautioned markets that authorities were prepared to implement “appropriate and bold action.” Katayama stated that Japan’s stance on possible intervention has not altered and that action would be taken if deemed necessary.
Escalating tensions in the Middle East may strengthen the Greenback relative to the JPY in the near term. Reuters reported on Thursday that US President Donald Trump stated the US would hold Iran accountable for the actions of the Houthis and cautioned that both Iran and its Houthi allies would soon face a “major military punishment.”