Japan’s July CPI and stronger August PMI data fuel expectations for a Bank of Japan rate hike next month, lifting the yen.
The Japanese yen rose 0.4% against the USD as July’s 1.9% CPI print and stronger-than-expected August PMI data reinforced expectations for Bank of Japan tightening. Swaps now price in about 20 bps of hikes for next month.
Inflation has steadily climbed since February, while preliminary PMI figures showed firm momentum in both services and manufacturing. The data added conviction to near-term BoJ policy shifts, supporting the yen’s modest rebound.
Technical analysis suggests a neutral to bearish outlook for USD/JPY, with losses below 158.25 potentially signaling further downside. The dollar’s recent weakness may offer temporary relief for the yen.