Yen Weakens as USD/JPY Nears 2-Week High After CPI

Key Moments

USD/JPY Extends Rally but Remains Trapped in Established Range

The USD/JPY pair maintained its upward momentum for the fifth session in a row, trading near 159.80 during the Asian session on Friday. This level sits close to a nearly two-week high, keeping the pair on course for solid weekly gains. Despite the recent strength, the price action remains confined within a trading band that has been in place for more than a month, suggesting that market participants may prefer to wait for a clear break of this range before committing to a more decisive short-term view.

Middle East Tensions and Growth Concerns Pressure the Yen

The Japanese Yen continued to underperform as investors focused on economic risks linked to escalating tensions in the Middle East. These worries, combined with a firm US Dollar, provided continued support for USD/JPY. Market participants remained doubtful about the durability of any agreement between the United States and Iran, citing the absence of progress in peace negotiations amid what was described as an American blockade of Iranian ports. According to the article, Iran has demanded the full removal of the US naval blockade as a strict condition for returning to talks.

In a further escalation, Iran attacked three ships in the Strait of Hormuz on Wednesday and seized two of them. This development added to concerns that Japan’s economy could face significant strain from ongoing disruptions to energy flows through this key transit route. The potential impact on energy supplies has been an additional factor weighing on sentiment toward the Yen.

BoJ Policy Expectations and Inflation Data Weigh on JPY

Expectations that the Bank of Japan will leave interest rates unchanged at its upcoming April meeting, reinforced by the latest inflation print, have also undermined the Yen and supported USD/JPY. A government release showed that Japan’s headline Consumer Price Index rebounded from its lowest level in nearly four years, rising to 1.5% year-on-year in March.

The core CPI measure, which excludes volatile fresh food prices, increased to 1.8% from 1.6% in February, though it stayed below the BoJ’s 2% target. A further refined core measure that strips out both fresh food and fuel climbed 2.4%, indicating persistent underlying price pressures and providing some support to arguments for a potential BoJ rate hike at a later stage. Nonetheless, this data failed to ignite sustained buying interest in the Yen.

US Dollar Support and Intervention Risks Define Near-Term Outlook

The US Dollar retained gains accumulated over the prior three sessions, underpinned by ongoing geopolitical uncertainty and a reduction in expectations for imminent dovish action from the US Federal Reserve. This backdrop added to the constructive tone around USD/JPY.

At the same time, market chatter about possible Japanese official intervention to curb further weakness in the domestic currency helped temper additional downside in the Yen and restricted the upside for the pair. This mix of supportive USD factors and intervention concerns has contributed to the current range-bound behavior, even as USD/JPY trades close to its recent highs.

Japan National CPI ex Fresh Food – Snapshot

Japan’s National Consumer Price Index excluding fresh food is released monthly by the Statistics Bureau of Japan. The indicator tracks nationwide price movements for goods and services purchased by households, excluding fresh food, which is often subject to weather-related volatility. The year-on-year figure compares price levels for the reference month against the same month a year earlier. In general, a stronger reading is typically interpreted as positive for the Japanese Yen, while a weaker figure is seen as negative.

Generally, a high reading is seen as bullish for the Japanese Yen (JPY), while a low reading is seen as bearish.