The USD/JPY pair edged lower to near 142.25 during Friday’s thinly traded Asian session, as concerns surrounding the economic consequences of US tariffs weighed on the US Dollar (USD). The Japanese Yen (JPY) found renewed strength following the release of firmer-than-expected domestic inflation figures.
Japanese Inflation Data Surprises to the Upside
According to data from the Japan Statistics Bureau, the National Consumer Price Index (CPI) rose 3.6% year-over-year in March, slightly easing from February’s 3.7%. However, core inflation measures came in stronger than expected. The National CPI excluding fresh food accelerated to 3.2%, up from 3.0% in the prior reading and in line with forecasts. Meanwhile, CPI excluding both fresh food and energy climbed to 2.9%, exceeding February’s 2.6%, signaling persistent price pressures.
The stronger inflation data buoyed the Yen in the immediate aftermath, reflecting expectations that underlying price momentum remains intact despite a cautious monetary policy outlook from the Bank of Japan (BoJ).
BoJ Signals Patience Despite Rising Prices
Despite the inflation uptick, the BoJ has signaled no immediate urgency to tighten policy. Governor Kazuo Ueda emphasized the need for careful assessment amid rising global uncertainty, particularly stemming from the United States’ tariff stance. “We will assess the economy and inflation carefully for an appropriate policy decision by being duly mindful of rising uncertainties stemming from US tariff measures,” Ueda said on Thursday.
BoJ board member Junko Nakagawa reinforced the message, urging high vigilance while monitoring external developments. These cautious remarks suggest the central bank is unlikely to accelerate tightening in the short term, potentially limiting further upside for the Yen.
US Data Offers Mixed Signals
In the US, economic data released on Thursday painted a mixed picture. Initial Jobless Claims fell to 215,000—the lowest in two months—suggesting labor market resilience. Conversely, the Philadelphia Fed Manufacturing Index declined, missing expectations and signaling weakness in the factory sector, a key area of concern amid rising tariff uncertainty.
Focus on Trade Talks and Diplomatic Engagement
Looking ahead, attention shifts to upcoming bilateral meetings, with Japan’s Finance Minister Katsunobu Kato expected to engage in further negotiations with US Treasury Secretary Scott Bessent. These talks build on groundwork laid by Prime Minister Shigeru Ishiba’s lead negotiator Ryosei Akazawa, as Tokyo and Washington seek common ground on trade policy.
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