Tokyo Inflation Beats Expectations, Yen Fails to Strengthen

Tokyo's core inflation rate hit 2.7% in September, exceeding expectations and putting more pressure on the Bank of Japan to act. However, the Japanese Yen (JPY) failed to strengthen against the US Dollar as one might expect, instead slipping below 158.00.

The BoJ had raised interest rates just days earlier, but speculators who bought record amounts of JPY in the lead-up to the decision have since reduced their net long positions. According to CFTC data, these investors cut their holdings from a record high of 216K contracts worth $17.3 billion to about 72K.

This suggests that the funds most likely to buy the Yen on a strong Japanese number already own it in large quantities, leaving little room for further gains. The BoJ's next decision is just around the corner, but the market seems less confident than expected in the Yen's ability to strengthen.