USD/JPY drops to 151.00 on hot Japan’s inflation

• USD/JPY falls to 151.00 even though the appeal for the US Dollar is upbeat.
• The USD Index refreshes monthly high on upbeat US economic outlook.
• Japan’s hot inflation for February has improved the credibility of BoJ’s shift to policy normalization.

The USD/JPY pair slips to 151.00 in Friday’s late European session. The Japanese Yen has been underpinned against the US Dollar as Japan’s hot February inflation data improved investors' confidence in the Bank of Japan’s (BoJ) decision to pivot to policy normalization. The asset faces pressure despite the buoyant US Dollar amid a significant improvement in the United States economic outlook.

The Statistics Bureau of Japan reported that Japan’s annual National headline Consumer Price Index (CPI) grew at a stronger pace of 2.8% compared to the prior release of 2.2%. BoJ’s preferred inflation measure that excludes fresh food rose by 2.8%, as expected, compared to the former reading of 2.2%. Price pressures remaining consistently above the 2% target will allow the BoJ to maintain interest rates positive despite maintaining an accommodative stance.

Also, increasing speculation about Japan’s government intervening in the FX domain provides support to the Japanese Yen. Japan's Finance Minister Shunichi Suzuki said that currencies must move in a stable manner and that he is closely watching foreign exchange moves with a high sense of urgency.

Meanwhile, the US Dollar Index (DXY) refreshes its monthly high at 104.44 as investors hope that rate cuts by the Federal Reserve (Fed) won’t be so aggressive due to the upbeat US economic outlook. The outlook for the US economy improved after the Federal Reserve (Fed) upwardly revised growth forecasts for 2024. The Fed sees the US Gross Domestic Product (GDP) growing by 2.1%, up from the 1.4% it projected in December.