Yen Strengthens Amid BOJ Rate Hike Bets, Dollar Eyes Labor Data

The Japanese yen firmed up on Friday following stronger-than-expected Tokyo inflation data. The Tokyo Consumer Price Index (CPI) showed a sharp increase, reaching its highest level since November 2025, with underlying inflation remaining above the Bank of Japan's 2% annual target.

This has led to increased bets that the BOJ will hike interest rates further in the coming months. The benchmark 10-year yield slid 1.25% after hitting a 30-year high earlier this week.

The dollar, meanwhile, was relatively steady ahead of key labor data for September. Several Fed officials, including Neel Kashkari and Lorie Logan, warned that rates will have to rise further to quash sticky inflation, giving the Federal Reserve more headroom to raise interest rates.