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A sharp rise in has revived speculation of a BOJ , but Governor Ueda’s comments suggest patience. pulled back from multi-month highs, though the broader uptrend remains intact. Tokyo CPI-ex fresh food lifts 2.8%, beating forecasts. Core-core inflation also jumped to 2.8%. BOJ signals no rush to hike, eyes wage talks. USD/JPY pulls back, but the trend remains bullish. Summary Tokyo’s inflation data surprised to the upside, with all key measures accelerating and staying well above the BOJ’s 2% target. While that’s reignited talk of a potential rate hike, Governor Ueda’s cautious stance and focus on spring wage negotiations suggest any move may be delayed. USD/JPY retreated from multi-month highs post-release, but with bullish momentum intact, traders may look to buy dips near key support levels. Tokyo Inflation Heats up Consumer prices in Japan’s capital Tokyo accelerated sharply in October, coming in well above market expectations and keeping the prospect of a rate hike from the Bank of Japan by year-end alive. In an ominous sign for what may be coming when the national report is released in late November, headline inflation accelerated to an annual pace of 2.8%, up from 2.5% in September. Excluding fresh food, inflation increased 2.8% from a year earlier, above the 2.5% pace of the prior two months and higher than the 2.6% rate expected. This is the measure the Bank of Japan targets, aiming for 2% growth per annum. Excluding fresh food and energy prices, the so-called core-core measure also lifted 2.8%, three tenths higher than a month earlier. Source: TradingView As seen in the chart above, all three measures remain well above the Bank of Japan’s 2% mandate. Given the strength of the rolling 36-month correlation coefficients between the Tokyo and nationwide data seen in blue, the bounce in the capital is likely to be reflective of price trends in other parts of the country. BOJ Focused on Wage Negotiations While there was mixed news from other economic data released on Friday—with unexpectedly ticking higher to 2.6%, retail sales undershooting forecasts, while industrial output impressed—when it comes to the path of interest rates in Japan, it really comes down to the international environment and, domestically, wage and inflation pressures. BOJ Governor Ueda underlined that point during his press conference on Thursday following the BOJ’s policy meeting, where it kept its key policy rate unchanged at 0.5%. He suggested the bank wanted to see “early momentum” in spring wage negotiations when considering whether to tighten policy further, signalling a desire to wait well into the first quarter of 2026 before an adjustment may be made. December Rate Hike a ‘Coin Flip’ Before the BOJ decision, swaps traders marginally favoured a 25 basis point rate hike in December, reflecting that two board members previously voted to lift rates in September and obvious pressure from U.S. officials to consider both growth and inflation outcomes when setting monetary and fiscal policy. Source: Bloomberg Now, despite the stronger-than-expected Tokyo inflation data, traders marginally favour no move from the BOJ in December, with a full 25 basis point hike not priced in until April when annual wage announcements will be made. The less hawkish rate outlook was one of the key factors that weighed on the Japanese yen on Thursday, along with the unexpected hawkish tilt from Jerome Powell following the late Wednesday. USD/JPY Pulls Back Following Breakout You can see in the USD/JPY daily chart below that the pair broke to fresh multi-month highs on Thursday before stalling above 154.00, pulling back modestly on Friday following the inflation report. With momentum indicators revealing strengthening upside pressure and price sitting in a strong uptrend, the preference remains to buy dips and bullish breaks over the near term. Source: TradingView 153.28 looms as an important focal point today, coinciding with former horizontal resistance. Having been broken, it may now flip to providing support, offering a potential entry level for longs where a stop can be placed below for protection. Thursday’s high and 154.80 resistance provide two potential targets. Considering the bullish break on Thursday came from within an ascending triangle pattern, neither option screens as overly ambitious. On the contrary, if convention proves accurate, the height of the triangle points to the potential for substantially larger gains. If 153.28 were to be broken on the downside, uptrend support would be the likely first port of call around 152.00—coincidentally, where the pair found buying support earlier this week.
