EUR/JPY retreats below 163.00 following upbeat Tokyo CPI data

EUR/JPY declines as the Japanese Yen gains strength following the release of Tokyo’s Consumer Price Index (CPI) data on Friday.
Tokyo’s core CPI increased by 2.4% year-on-year in March, staying above the Bank of Japan’s 2% target.
The Euro (EUR) weakens as trade tensions rise between the United States and the Eurozone.

Akhtar Faruqui FXStreet

EUR/JPY retraces its recent gains from the previous session, trading around 162.70 during the Asian hours. The currency cross depreciates as the Japanese Yen (JPY) strengthens following the release of Tokyo’s Consumer Price Index (CPI) data on Friday.

Tokyo’s core CPI rose 2.4% year-on-year in March, up from 2.2% in February, aligning with market expectations. This marks the fifth consecutive month that core inflation has remained above the Bank of Japan’s (BoJ) 2% target, reinforcing speculation that the central bank will continue normalizing its monetary policy.

The headline Tokyo CPI for March increased 2.9% YoY, unchanged from the previous month, according to Japan’s Statistics Bureau. Meanwhile, Tokyo CPI, excluding fresh food and energy, rose to 1.1% in March from 0.8% in February (revised from 2.2%).

The BoJ, in its March meeting summary, reaffirmed its commitment to raising policy interest rates and adjusting monetary accommodation if economic and price conditions warrant. The central bank emphasized a flexible, data-driven approach, taking into account evolving economic trends, inflationary pressures, and associated risks.

The EUR/JPY cross also faces pressure as the Euro (EUR) weakens against its peers amid escalating trade tensions between the United States (US) and the Eurozone. Concerns over a potential trade war have intensified as the European Union (EU) prepares retaliatory tariffs in response to the 25% auto tariffs imposed by President Donald Trump, set to take effect on April 2.

Germany is expected to be significantly impacted, as 13% of its total auto exports are sent to the US. This development could weigh on the Euro’s outlook. On Wednesday, Trump signed a proclamation enforcing the tariffs and warned of stricter measures against the EU and Canada if they retaliate.

Economic Indicator

Tokyo CPI ex Fresh Food (YoY)

The Tokyo Consumer Price Index (CPI), released by the Statistics Bureau of Japan on a monthly basis, measures the price fluctuation of goods and services purchased by households in the Tokyo region excluding fresh food, whose prices often fluctuate depending on the weather. The index is widely considered as a leading indicator of Japan’s overall CPI as it is published weeks before the nationwide reading. The YoY reading compares prices in the reference month to the same month a year earlier. Generally, a high reading is seen as bullish for the Japanese Yen (JPY), while a low reading is seen as bearish.

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

Editor's Picks

EUR/USD trims losses and returns to the 1.1750 area

The US Dollar resumed its decline in the American afternoon, helping EUR/USD trim early losses. The pair trades around 1.1750 as market participants gear up for the European Central Bank monetary policy decision and the United States Consumer Price Index.