Yen Rallies on Hotter Tokyo Inflation
The Japanese yen saw a rebound in Asian trading on Friday after hotter-than-expected inflation data in Tokyo fueled expectations of an interest rate hike by the Bank of Japan. The yen had fallen to a one-week low against the US dollar, but rose against a basket of major and minor currencies.
The core Consumer Price Index in Tokyo rose 2.7% in September, its fastest pace since November 2025, surpassing market expectations for a 2.4% increase. This has put pressure on policymakers to continue monetary policy normalization through further interest rate hikes this year.
Market pricing for a 25-basis-point Bank of Japan interest rate hike at its October meeting increased from 25% to 50% following the data release. Investors are awaiting further data on inflation, unemployment, and wages in Japan to reassess their expectations.