USD/JPY: Second consecutive week closes higher

USD/JPY rose to 159.04 at the end of the week, marking the yen’s second consecutive weekly decline. The Japanese currency came under pressure after weaker inflation data reduced expectations of imminent Bank of Japan policy tightening.

Core inflation in Japan slowed to 1.4% in April, down from 1.8% the previous month – the lowest level in four years. Moreover, the indicator has remained below the Bank of Japan’s 2% target for the third consecutive month.

At its April meeting, the BOJ sharply raised its core inflation forecast for the current year to 2.8%, up from 1.9%. The regulator attributed this revision to high oil prices amid the Middle East conflict and the continued pass-through of business costs to consumers.

Additional market attention has been drawn to reports that Japanese Prime Minister Sanae Takaichi is considering an additional budget to compensate for rising energy prices.

At the same time, markets continue to monitor the risk of fresh foreign exchange interventions. The yen remains near the 160-per-dollar level — the level that triggered Japanese authorities’ interventions in late April and early May.