USD/JPY weakens below 146.50 after Japanese national CPI data, BoJ Ueda speech

• USD/JPY loses traction to near 146.20 in the first Asian session on Wednesday.
• Japan’s CPI inflation continued to rise in July, adding to expectations for another BoJ rate hike.
• The Fed’s Collins said it would soon be appropriate to start cutting rates.

USD/JPY is trading weaker near 146.20 during the early Asian session on Friday. The Japanese Yen (JPY) is surging higher following the release of National Consumer Price Index (CPI) inflation data and Bank of Japan (BoJ) Governor Kazuo Ueda’s speech. Traders will be closely watching US Federal Reserve (Fed) Chairman Jerome Powell’s speech at the Jackson Hole Symposium later Friday.

Data released Friday by Japan’s Statistics Bureau showed the country’s core national CPI rose 2.8 percent from a year ago in July, compared with 2.8 percent in June. Meanwhile, core inflation, which excludes fresh food prices, came in at 2.7% year-on-year in the same reporting period, up from 2.6% previously. The figure was in line with market expectations and could have revitalized the case for a BoJ rate hike, which lifts the JPY against its rivals

The so-called “core-core” inflation rate, which excludes both fresh food and energy prices, fell to 1.9 percent from a year ago in July, from 2.2 percent in June. This figure marked the lowest level since September 2022.

Additionally, dovish comments from BoJ Governor Ueda boost the JPY overall. BoJ Governor Kazuo Ueda said on Friday that the Japanese economy was moving in line with the protection of the price target. Ueda added that the central bank expects to adjust policy if the economy moves according to plan.

On the other hand, markets expect the Fed to start easing policy at the September meeting. The minutes released on Wednesday indicated that a majority of Fed members support a rate cut at the next meeting next month. Investors are now pricing in about 76% odds of a 25 basis point (bps) Fed rate cut at the September meeting, according to CME’s FedWatch tool. Markets are seeing a full cut in interest rates expected by the end of this year.

On Thursday, Federal Reserve Bank of Boston President Susan Collins said it would soon be appropriate to begin cutting rates, adding that incoming data would guide the pace of rate cuts. Kansas City Fed President Jeff Schmid noted on Thursday that he is watching the dynamics behind the rise in the unemployment rate more closely and will let the data guide his decision on whether to support a rate cut next month. Attention will turn to the Fed’s Powell speech later on Friday, which could provide some clues about the path of US interest rates.