The Bank of Japan (BoJ) attracted some buyers after the release of strong Tokyo consumer price index (CPI).
The Bank of Japan's hawkish stance and risk aversion further supported the safe-haven yen (JPY).
The release of the US personal consumption expenditures (PCE) price index later this Friday is expected to provide fresh impetus to the US dollar/Japanese yen (USD/JPY).
The Japanese yen (JPY) fell to a near four-week low against the US dollar (USD) during Friday's Asian trading session on concerns that US President Donald Trump's trade tariffs could affect key domestic exports. However, yen bulls got some breathing room with the release of strong consumer inflation data in Tokyo (Japan's capital), which opened the door for further rate hikes from the Bank of Japan (BoJ). In addition, the BoJ's summary of opinions showed that rate hikes remain an option if the economy and prices are in line with forecasts.
Apart from this, the general risk-off environment triggered by Trump’s auto tariff announcement on Wednesday became another factor supporting the safe-haven yen and dragged USD/JPY below 151.00 in the last hour. Nonetheless, some dip buying in the US dollar (USD) may provide support for the pair, helping to limit further losses. In addition, traders may choose to wait and see the release of the US personal consumption expenditures (PCE) price index for clues on the Federal Reserve’s (Fed) path of rate cuts.
US President Donald Trump announced on Wednesday a 25% tariff on imported cars and light trucks, which is expected to take effect on April 3. This has raised concerns that the tariffs will have a far-reaching impact on Japan’s auto industry, which accounts for about 3% of Japan’s GDP.
Data released earlier on Friday showed that Tokyo's consumer price index (CPI) rose 2.9% in March, up from 2.8% in the previous month. In addition, Tokyo's core CPI, which excludes volatile fresh food prices, rose to 2.4% in the reporting month from 2.2%.
In addition, the core CPI, which excludes volatile fresh food and energy prices, rose to 2.2% in March from 1.9% in the previous month. This has exceeded the Bank of Japan's annual 2% target and supports the case for further rate hikes by the Bank of Japan.
The summary of opinions from the Bank of Japan's March meeting showed that the consensus for continued rate hikes remains if the economy and prices are in line with forecasts. However, the board believes that policy must remain stable for the time being due to the increased downside risks to the economy caused by the US tariff policy.
Global risk sentiment has been hit by Trump's auto tariffs, and there are concerns that reciprocal tariffs next week will weaken the US economy. This overshadowed an upward revision to U.S. GDP in the fourth quarter, which showed the economy grew at an annualized rate of 2.4%, higher than the previous estimate of 2.3%.
Richmond Federal Reserve Bank President Thomas Barkin warned on Thursday that economic uncertainty caused by the Trump administration's trade policies could curb consumer and business spending and force central banks to adopt a wait-and-see approach rather than the proactive stance most investors would like.
Boston Federal Reserve Bank President Susan Collins pointed out that the challenge facing the U.S. central bank now is to choose whether to maintain a tight policy stance or try to get ahead of data that may deteriorate in the future. Given the outlook, Collins expects the Fed to keep interest rates unchanged for a longer period of time.
Investors now look forward to the release of the U.S. personal consumption expenditures (PCE) price index, which may provide new clues on the Fed's future path of rate cuts. This in turn will boost the dollar and provide some meaningful momentum to the U.S. dollar/Japanese yen (USD/JPY).
From a technical perspective, the intraday pullback from near the monthly highs calls for caution before making fresh bullish bets on the USD/JPY pair. Meanwhile, oscillators on the daily chart have just started to gain positive traction, supporting the prospect of buying on dips around the 150.00 psychological mark. However, a sustained sell-off below the 149.85-149.80 area would negate this positive bias and drag the spot price to the 149.25 support area, which in turn points to the next relevant support at the 149.00 round number and 148.65 area.
On the other hand, a breakout above the monthly high, near the 151.30 area, could face some resistance near the technically important 200-day simple moving average (SMA), currently located in the 151.65 area. A sustained strong break above this SMA would be seen as a new trigger for bulls and allow USD/JPY to recapture the 152.00 mark. Positive momentum could extend further to the 152.45-152.50 area before spot prices challenge the 100-day SMA, near the 153.00 round number.
The Tokyo Consumer Price Index, published by the Ministry of Internal Affairs and Communications, assesses price changes for a basket of goods and services that an average household in the Tokyo area is likely to purchase. The Tokyo Consumer Price Index is a key indicator for measuring inflation and yen purchasing power trends in the Tokyo area. Inflation reflects the decline in the yen's purchasing power, which means that each yen buys fewer goods and services. If the data rises, it means that the Bank of Japan may raise interest rates to control inflation, which will be good for the yen; on the contrary, if the data falls, it means that the Bank of Japan may keep interest rates unchanged or lower interest rates, which will be bad for the yen.