| Key Points: – Japan’s headline inflation 1.5% in January, missing 2.1% forecast. – Lowest since March 2022, ending 45‑month run above BoJ’s 2% target. – USD/JPY slipped below 50‑day EMA; traders eyed US Core PCE, GDP. |
Japan’s headline inflation fell to 1.5% in January, below the 2.1% forecast and marking the lowest level since March 2022, as reported by ForexFactory. The miss versus expectations suggests softer near-term pricing momentum relative to recent trends.
This outcome ended a 45‑month stretch with inflation above the Bank of Japan’s 2% target, as reported by CNBC. The break in that sequence narrows the case for immediate tightening relative to prior assumptions.
In markets, USD/JPY reaction reflected the softer print. According to FXEmpire, the pair traded below its 50‑day EMA as traders watched incoming US Core PCE and GDP updates for cross‑currents.
Bank of Japan rate hike expectations under Kazuo Ueda
Under Governor Kazuo Ueda, the policy reaction function remains data‑dependent, with wages and underlying inflation central to decisions. The Bank of Japan kept its key short‑term rate unchanged at 0.75% at its first 2026 meeting, according to the Bank of Japan.
“The softer inflation print is modestly yen‑negative at the margin, tempering immediate expectations for further tightening,” said analysts at InvestingLive.
Ueda has emphasized that underlying inflation excluding volatile items remains modest and that further hikes hinge on inflation and wage growth evolving as projected, as reported by LiveMint. That stance suggests the bank will assess wage settlements and trend inflation before adjusting rates again.
External views reflect a gradual path: Bank of America Securities expects the BoJ to raise its policy rate from 0.75% to 1.0% at the April 27–28 meeting. Such projections are contingent on data holding near current trajectories rather than a one‑month inflation dip.
At the time of this writing, Mitsubishi UFJ Financial Group closed at JPY 3,034, up 2.59%, based on a delayed Tokyo exchange quote. Equity moves are contextual and do not imply a policy outcome.
Context in brief
Lowest since March 2022; ended 45‑month run above 2%
The figures indicate the first sub‑target print after a long streak, aligning with a January headline rate of 1.5%. The level is the weakest since March 2022, underscoring a cooling from prior peaks.
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