Japanese private sector growth hits a six-month high, while July CPI meets forecasts but remains below BoJ’s 2026 targets.
USD/JPY is testing key support at its 200-day moving average of 158.34 as Japanese economic data firms. August’s composite PMI rose to 53.4, a six-month high, driven by gains in manufacturing and services output.
Japan’s July CPI aligned with consensus, with headline inflation at 1.9% year-over-year and core CPI ex-fresh food at 1.8%. Both measures remain below the Bank of Japan’s 2026 forecast of 2.5%. Markets price an 82% chance of a 25bps BoJ hike in September, with 75bps of tightening expected over the next year.
Analysts doubt further aggressive tightening, citing contained inflation and flat private consumption in Q2. A dovish Fed repricing could push USD/JPY lower, though BoJ policy remains a key driver.