- USD/JPY dipped to about 146.85 early in the Asian session on Friday.
- Tokyo’s core CPI rose 2.5% year-over-year in August, aligning with predictions.
- The US economy expanded at an annual rate of 3.3% in the second quarter of 2025.
The USD/JPY pair has softened to roughly 146.85 during the early hours of Friday in Asia. The yen has gained some strength against the dollar following the release of Japan’s consumer price index (CPI) report for August. Attention now shifts to the upcoming US Personal Consumption Expenditure (PCE) Price Index Report that will be published later in the day.
As reported by the Japan Statistics Bureau, the Tokyo CPI rose by 2.6% year-over-year in August. However, the core CPI experienced a decrease from 2.9% in July to 2.5% in August, which is consistent with market expectations.
As of August 29, 2025, Tokyo’s core consumer price index stands at 2.5% annually, aligning perfectly with market forecasts. In comparison, the CPI for Tokyo indicates a year-over-year rise of 3.0% for August, slightly down from the previous 3.1% predicted by the Bank of Japan (BOJ).
These inflation reports from Tokyo are likely to influence market expectations regarding potential interest rate hikes, thus supporting the yen. Almost two-thirds of economists surveyed by Reuters in August anticipate that the BOJ will increase key interest rates by at least 25 basis points later in the year.
On the other hand, the unexpectedly strong growth of the US economy in the second quarter (Q2) could bolster the dollar further. The economy witnessed an annual growth rate of 3.3% in Q2, which was faster than previously estimated, driven by robust business investments and significant trade contributions.
Investors will be looking for more insights from the US PCE Inflation Report released on Friday. It is expected that the headline PCE will show a 2.6% increase year-over-year for July, while the core PCE is anticipated to rise by 2.9% during the same timeframe.
