Dollar-Yen Gains as Soft Tokyo Inflation Weighs on Yen

Key Moments

Fundamental Drivers

The USD/JPY pair is trading slightly higher around 159.32 during the Asian session on Friday, as the Japanese Yen trades cautiously in the wake of fresh inflation data from Tokyo and renewed verbal warnings on currency moves from Japan’s Finance Minister Satsuki Katayama.

Tokyo’s Consumer Price Index excluding Fresh Food – a gauge closely monitored by Bank of Japan officials – came in at 1.3% Year-on-Year, undershooting both expectations and the previous reading of 1.5%. According to Reuters, the measure has now remained below the BoJ’s 2% target for a fourth consecutive month, with fuel and education subsidies helping to counterbalance upward pressure from higher raw material costs linked to the U.S.-Israeli war on Iran.

Against this backdrop, Finance Minister Katayama warned that authorities could step into the foreign exchange market if needed to curb excessive volatility in the Yen.

At the same time, the US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, is trading slightly firmer near 99.00, hovering close to Thursday’s low of 98.95.

On Thursday, the US Dollar came under sharp selling pressure after media reports indicated that a deal between the United States and Iran had been prepared and was only awaiting approval from President Donald Trump.

USD/JPY Technical Outlook

USD/JPY is ticking higher around 159.32 in Asian trading, maintaining a constructive bullish tone. The spot rate is holding above the 20-day exponential moving average at 158.78, which continues to underpin the short-term uptrend despite recent swings in volatility.

The Relative Strength Index is hovering near 56, pointing to moderate upside momentum rather than stretched, overbought conditions. This configuration leaves scope for additional gains as long as price action remains supported above the key moving average.

On the downside, initial support is located at the 20-day EMA around 158.78, where buyers are expected to defend the prevailing uptrend. A clear break below this level would open the door to a deeper corrective phase toward the May 6 high at 157.94.

On the topside, the pair is positioned to attempt another move toward an almost two-year high at 160.74, which remains the next notable resistance level on the chart.

Tokyo CPI ex Fresh Food – Key Details

The Tokyo Consumer Price Index excluding Fresh Food is released monthly by the Statistics Bureau of Japan and tracks price changes for a basket of goods and services purchased by households in the Tokyo area, excluding fresh food items whose prices can be highly volatile due to weather conditions. Because it is published weeks before the nationwide CPI, it is widely regarded as a leading indicator for Japan’s overall inflation trend. The Year-on-Year figure compares prices in the reference month with the same month a year earlier. In general, a higher reading tends to be supportive for the Japanese Yen, while a lower reading is usually seen as negative for the currency.