 Despite an upside surprise in Japan’s core inflation data, Yen extended its decline across the board today. While CPI ex-food rose 3.7% yoy in May, much of the gain was driven by an outsized 100%+ surge in rice prices, which alone contributed nearly half of the index’s increase. This jump, widely seen as transitory due to supply issues, is expected to ease in the autumn, limiting its significance for monetary policy. More importantly, the minutes from the BoJ’s May meeting revealed a central bank growing more cautious. One policymaker acknowledged that “the likelihood of realizing the outlook…was not as high as before,” while others emphasized the need to weigh both upside and downside risks amid extreme global uncertainty. With that tone, hopes for another rate hike this year are fading fast. Adding to the caution is the ongoing threat of US-Japan trade friction. If Tokyo fails to secure exemptions from rising tariffs—especially on autos and steel—the economic drag could deepen into late 2025, further weakening the case for policy tightening. That reinforces a narrative of prolonged BoJ patience, even amid sticky inflation. On the currency performance board, Yen sits firmly at the bottom for the week, joined by Loonie and Swiss Franc. In contrast, Aussie and Kiwi lead the pack, with the Dollar holding firm—for now—alongside them. Euro and Pound trade in the middle of the spectrum. However, Dollar strength looks increasingly fragile heading into the Friday close...... |
