Japan\u2019s National CPI rose 1.5% year on year in January, down from 2.1%, based on data from the Japan Statistics Bureau. National CPI excluding fresh food was 2.0% year on year, down from 2.4% and in line with the market consensus.<\/p>\n
CPI excluding fresh food and energy increased 2.6% year on year in January, compared with 2.9% previously. After the release, USD\/JPY was up 0.16% at 155.05.<\/p>\n
Inflation tracks the rise in prices of a basket of goods and services, often shown as month-on-month and year-on-year changes. Core inflation removes more volatile items such as food and fuel and is often used for policy targets around 2%.<\/p>\n
The Consumer Price Index measures price changes for a basket of goods and services over time and is also reported on MoM and YoY bases. Core CPI excludes volatile food and fuel, and higher core readings are often linked with higher interest rates.<\/p>\n
In foreign exchange, central banks may raise interest rates to counter higher inflation, which can support a currency. For gold, higher interest rates can reduce demand by raising the cost of holding a non-yielding asset, while lower inflation can have the opposite effect.<\/p>\n
The latest inflation data from Japan shows a distinct cooling trend, with the core rate dropping to the 2.0% target in January. This slowdown eases the pressure on the Bank of Japan to consider further interest rate hikes in the immediate future. As a result, the wide interest rate difference between the United States and Japan is likely to persist, supporting a strong dollar against the yen.<\/p>\n
This view is reinforced by recent economic figures from the United States, where early February non-farm payrolls showed unexpected strength, adding 210,000 jobs. Such resilience in the US economy suggests the Federal Reserve will not be in a hurry to cut its own interest rates. This policy divergence is the key factor keeping the USD\/JPY pair trading firmly near the 155 mark.<\/p>\n
For derivatives traders, this situation makes buying USD\/JPY call options an appealing strategy over the next few weeks. We are looking at strikes around the 157 or 158 levels with expirations in late March or April to capitalize on further potential yen weakness. This approach provides a defined-risk method to profit if the current trend continues.<\/p>\n
Reflecting on 2025, we observed that the Bank of Japan\u2019s hesitant approach following its historic policy shift prevented any sustained rally in the yen. Current implied volatility for USD\/JPY options has recently settled near 7.5%, which is noticeably lower than the double-digit levels seen for much of last year. This makes option premiums relatively less expensive, presenting a good opportunity to establish positions.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Japan\u2019s inflation cooled in January: headline CPI 1.5%, core 2.0%; USD\/JPY rose to 155.05.<\/p>\n","protected":false},"author":62,"featured_media":17051,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-42361","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/42361","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=42361"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/42361\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17051"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=42361"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=42361"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=42361"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}