Weak US Data and Hawkish BoJ Expectations Drive USD/JPY Lower

The US dollar is under pressure against the Japanese yen as weak economic data and hawkish expectations from the Bank of Japan (BoJ) continue to support the yen.

CORE PCE inflation increased by only 0.1% month-over-month, below market forecasts, while Q2 GDP growth slowed to 1.5%, signaling a loss of momentum in the US economy. These developments have weighed on both the dollar and Treasury yields, reducing support for USD/JPY.

In contrast, Japanese economic data surprised to the upside, with Tokyo Core CPI accelerating to 1.9% year-over-year, above the 1.8% forecast, and Industrial Production rising 1.3% month-over-month, exceeding expectations.

The BoJ maintained its policy rate at 1.00%, but investors remain focused on the Monetary Policy Statement, Outlook Report, and Press Conference for further guidance on future policy normalization. Any indication that the BoJ remains confident about inflation and economic growth could provide additional support for the yen.