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USD/JPY holds near 147.7 as BOJ Core CPI falls to 2.0%
The Bank of Japan’s Core CPI y/y eased to 2.0% in July, below forecasts of 2.4% and down from 2.3% in June. The release, delayed by about ten minutes, highlighted that underlying inflation is softening and moving closer to the BOJ’s 2% target. The data reinforced expectations that the central bank will remain patient, focusing instead on wage trends and the sustainability of price momentum.
The overall tone of the report was “dovish but not alarming,” suggesting that while inflation has cooled, it is not collapsing. Policymakers are likely to emphasize that a single data point does not alter the medium-term objective of maintaining stable 2% inflation, but the sharp downside surprise reduces the urgency for further tightening.

 

USDJPY Daily Chart
Market reaction was limited. USD/JPY consolidated around 147.7, showing that yen weakness from policy divergence with the Federal Reserve remains intact, though softer inflation capped further gains.
JP225 Daily Chart
Meanwhile, the Nikkei 225 index hovered near 42,400, close to multi-decade highs, as easing inflation pressure lowered the perceived risk of additional rate hikes, providing support for equities.
Investors interpreted the release as signalling that the BOJ is in no rush to adjust policy in the near term. The yen failed to find lasting support, while Japanese equities benefited from the reduced tightening risk. Looking ahead, attention will shift to the next Core CPI release on September 23 as well as Tokyo CPI and wage growth data. If underlying inflation weakens further, USD/JPY may remain rangebound with upside capped, while the Nikkei could continue to find support from a benign policy backdrop.
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