USD/JPY Holds Steady Amid Japan's Modest Inflation Rebound

The USD/JPY exchange rate has remained stable at around 163.80 during Friday's Asian trading session, despite Japan's latest inflation data showing a modest recovery in domestic price pressures.

Japan's national consumer price index (CPI) rose 1.7% year-on-year in June, up from 1.5% in May, and core CPI increased 1.6% year-on-year, rebounding from the previous reading of 1.4%, in line with market expectations.

However, the closely watched 'core-core' inflation measure, excluding both fresh food and energy prices, declined to a year-on-year rate of 1.7% in June, down from 1.8% previously, marking its lowest level since August 2022.

The primary driver behind the yen's current weakness remains the interest rate differential between the U.S. and Japan, with persistently high U.S. interest rates enhancing the attractiveness of dollar-denominated assets.