Japan’s National Consumer Price Index (CPI) increased by 3.6% year-over-year in March, according to data released by the Japan Statistics Bureau. This represents a slight decrease from the previous month’s reading of 3.7%. The National CPI excluding fresh food rose by 3.2% year-over-year, aligning with market expectations. The CPI excluding fresh food and energy experienced a 2.9% year-over-year increase, compared to the prior reading of 2.6%. Following the release of the CPI data, the USD/JPY currency pair experienced a marginal decrease of 0.05%, trading at 142.38.
The Japanese Yen’s value is influenced by factors including the performance of the Japanese economy, the Bank of Japan’s (BoJ) monetary policy, the yield differential between Japanese and US bonds, and overall risk sentiment. The BoJ’s policy decisions, including direct intervention in currency markets, significantly impact the Yen. The BoJ’s ultra-loose monetary policy from 2013 to 2024 contributed to Yen depreciation due to policy divergence with other central banks. The gradual unwinding of this policy has recently provided some support to the Yen.
The divergence between Japanese and US bond yields, driven by the BoJ’s ultra-loose monetary policy and the US Federal Reserve’s actions, has historically favored the US Dollar against the Yen. The BoJ’s recent shift away from ultra-loose policy, coupled with potential interest rate cuts by other major central banks, is narrowing this differential. As a safe-haven asset, the Yen tends to appreciate during periods of market uncertainty as investors seek stability.
