USD/JPY calm as BoJ Core CPI rises

The Japanese yen is showing limited movement on Tuesday. In the North American session, USD/JPY is trading at 157.33, up 0.11% on the day at the time of writing.

The yen is having a dreadful time as it continues to lose ground against the strong US dollar. Since Oct. 1, the yen has plunged 9.5% and the yen’s woes could force the Bank of Japan to intervene on the currency markets in order to prop up the ailing currency.

BOJ core CPI climbs to 1.7%

The BoJ Core CPI index, which is closely watched by the central bank, rose to 1.7% y/y in November, up from 1.5% in October and above the market estimate or 1.5%. This release follows last week’s national headline inflation release, which jumped to 2.9% in November from 2.3% in October. This was the highest level since October 2023.  The gain was driven by sharp increases in food and electricity prices. Notably, core CPI, which excludes food, rose from 2.6% to 2.7% and core-core CPI, which excludes food and energy, climbed from 2.3% to 2.4%.

Any way you cut it, inflation is moving higher and that has raised expectations that the Bank of Japan will raise rates in early 2025. The BoJ held rates at last week’s meeting and BOJ Governor Ueda said that since underlying inflation was only increasing “at a moderate pace”, the BoJ could take its time in raising rates. However, with inflation rising and the yen pushing closer to the 160 level, the BoJ could respond with a rate hike as early as January.

The BoJ is also concerned with the incoming Trump administration, which has pledged to slap tariffs on US trading partners. Bank policy makers will be nervously watching if Trump moves ahead with tariffs or is his bark worse than his bite. The BoJ meets next on Jan.24, a day after Trump is sworn into office.

USD/JPY Technical

• There is resistance at 157.51 and 157.86
• 156.93 and 156.58 are the next support levels

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