Japan's July Inflation Report: A Non-Event for BOJ Policy

The Japanese Yen has been on a rollercoaster ride in recent weeks, and its current surge is being driven by factors beyond just monetary policy. The USD/JPY pair traded near 159.00 late in the session, with the yen appreciating 0.5% on the day.

This move comes after three weeks of rebuilding from a coordinated intervention at the turn of the month, where the Ministry of Finance and the American Treasury jointly purchased Yen worth an estimated $37 billion. The intervention was aimed at stemming the currency's rise, which had reached levels not seen since the 1980s.

However, the yen's recovery has been partly reversed, with the pair now trading roughly five yen below its pre-intervention high. Despite this, the Ministry of Finance continues to defend the currency, and Friday's release of Japan's July inflation report is unlikely to change the Bank of Japan's policy stance.

The inflation report is expected to show core inflation at 1.8%, a six-month high, but still below the target rate. This would not be enough to prompt a policy change from the Bank of Japan, which has already priced in a September interest rate hike at around 80% odds.