Japan's core CPI cools as expected

The Japanese yen is showing little movement on Friday. In the North American session, USD/JPY is trading at 148.69, up 0.06% on the day. On the data calendar, Japan's inflation rate eased in June. It's a light day in the US, highlighted by UoM consumer sentiment and inflation expectations.

Japan's core CPI eases to 3.3%

Inflation in Japan fell in June as expected and the yen is showing little movement today. Headline CPI dropped to 3.3% y/y from 3.5% in May, matching the consensus. This was the lowest level since Nov. 2024, as prices for electricity and gasoline rose more slowly in June. Food prices were up 7.2%, the most since March, as rice prices soared 100%. Monthly, CPI eased to 0.1%, down from 0.3% in May. Core inflation, which excludes fresh food but includes energy, fell to 3.3% from 3.7%, in line with the consensus and the lowest pace since March.

The inflation numbers come just before an election for Japan's Upper House of Parliament on Sunday. The ruling coalition is in danger of losing its majority, and if that happens, it will likely impact yields and the yen next week.

The Bank of Japan meets next on July 31 and is expected to continue its wait-and-see approach and hold interest rates. The BoJ hiked rates in January but hopes for a series of rate increases were dashed after US President Trump promised and delivered tariffs on many US trading partners, including Japan.

Trade talks between the US and Japan have bogged down and Trump has threatened to hit Japan with 25% tariffs if an agreement isn't reached by Aug. 1. In this uncertain environment, the BoJ isn't likely to raise interest rates.

USD/JPY technical

• USD/JPY is testing resistance at 148.66. Above, there is resistance at 1.4882.
• 148.44 and 148.28 are the next support levels.