USD/JPY Falls Below 142.50 as Japanese Inflation Remains Strong and US Data Provides Mixed Signals
The USD/JPY currency pair fell below the 142.50 level in Friday’s early Asian session, as the Yen was strengthened by higher-than-anticipated Japanese inflation data. Japan’s Consumer Price Index (CPI) increased 3.6% from year earlier in March, with core CPI rising to 3.2%, meeting market forecasts but supporting the Bank of Japan’s conservative view on policy tightening in the context of external uncertainties, including U.S. tariffs. In contrast, the U.S. dollar fared poorly even as Initial Jobless Claims decreased to a two-month low, as weaker manufacturing data from the Philadelphia Fed Index triggered worries over economic momentum. The blend of resilient Japanese inflation and conflicting U.S. data held the Yen strong, though possible upside is still constrained by cautious central bank cues. KEY LOOKOUTS • Japan’s March CPI data revealed ongoing price pressures, supporting the Yen and questioning the Bank of Japan’s next policy steps. • Even with robust inflation numbers, BoJ authorities, including Governor Ueda, are hesitant to increase rates further, highlighting that uncertainties must be watched, particularly those related to U.S. tariff movements. • Although U.S. Initial Jobless Claims fell to a two-month low, indicating the labor market’s stability, the Philadelphia Fed Index fell short of expectations, which suggested manufacturing weakness. • Markets are keeping close eyes on ongoing trade talks between Japan and the U.S., which may continue to impact currency trends as tensions escalate in global trade. The USD/JPY pair comes under renewed stress with Japan’s March inflation readings highlighting ongoing price growth, lending strength to projections of a dovish but firm economic scenario. Though the stronger CPI readings had earlier boosted the Yen, cues from the Bank of Japan indicating patience regarding coming rate hikes have subdued bullish exuberance. Meanwhile, confusing U.S. economic signals — with unemployment claims falling to a two-month low and manufacturing figures coming in weaker than expected — have kept the U.S. dollar on the defensive. The continuing trade talks between Japan and the U.S. will most probably continue to be a priority for investors, as policy and global trade risks continue to influence market mood in the next few sessions. USD/JPY pair fell under 142.50 following strong Japan’s March inflation that drove up the Yen. Still, BoJ’s dovish position regarding interest hikes and on-going U.S.-Japan trade discussions will act as a deterrent against further gains of JPY. Hesitant U.S. data further exacerbated the weakness in the Dollar earlier in the day in Asian time. • USD/JPY fell under 142.50 in early Asia trading Friday due to better-than-expected Japanese inflation numbers. • Japan’s March CPI increased 3.6% YoY, down modestly from 3.7% earlier but still showing sustained price firmness. • Core CPI (excluding fresh food) rose to 3.2%, in line with expectations and showing stable underlying inflation. • BoJ officials indicated restraint on rate hikes, pointing to overseas uncertainties, particularly over U.S. tariff policies. • The U.S. Initial Jobless Claims declined to a two-month low, showing sustained labor market robustness. • Philadelphia Fed Index decreased, falling below expectations and prompting worries about the health of U.S. manufacturing. • Market attention centers on Japan-U.S. trade negotiations, which may determine direction of currencies and markets in the future amidst tariff tensions. Japan’s recent inflation figures showed that consumer prices were still high in March, as the National Consumer Price Index (CPI) increased 3.6% from one year ago. Core inflation, which excludes fresh food, came in at 3.2%, matching market expectations and suggesting steady price growth despite a slight cooling from previous months. The data reflects the ongoing impact of cost pressures on the Japanese economy, while policymakers at the Bank of Japan continue to approach future rate decisions with caution, citing global uncertainties, including the effects of U.S. tariff policies. USD/JPY DAILY PRICE CHART CHART SOURCE: TradingView At the same time, American economic indicators offered a mixed view. Initial Jobless Claims decreased to their two-month lowest level, reflecting a robust labor market. Yet the Philadelphia Fed Index of regional manufacturing activity lagged expectations and caused worries for the health of the manufacturing sector. Investors also monitor the developments of Japan-U.S. trade talks, as negotiations on tariffs and economic cooperation are ongoing between the highest authorities from both nations. TECHNICAL ANALYSIS USD/JPY pair is demonstrating bearish strength after breaking down below the 142.50 support level, which points to further declines if the sellers hold on to power. The pair is oscillating around the 142.20–142.25 zone, which has become an immediate support, and any attempts to bounce back might get resistance at around the 142.80–143.00 zone. The Relative Strength Index (RSI) on the lower timeframes indicates a weak oversold condition, pointing toward the likelihood of a short-term corrective bounce or consolidation preceding the next direction. Market participants will carefully observe price action around these crucial levels for additional indications. FORECAST USD/JPY pair is able to remain above the 142.20 support level and attracts some demand, it may try to stage a recovery towards the 142.80–143.00 resistance area. A continued breakout above here could pave the way for more upside, particularly if U.S. economic statistics surprise on the upside or if risk appetite picks up in international markets. Second, any hint of policy divergence among the Federal Reserve and the Bank of Japan — while the Fed remains resolute on interest rates — could also give a boost to a stronger Dollar in the short term. On the downside, if USD/JPY breaks and settles below the 142.20 support level, it could trigger fresh selling pressure, leading the pair toward the next support around the 141.50 region. Continued strength in Japanese inflation, combined with global trade tensions and weaker U.S. manufacturing indicators, could weigh further on the pair. In this scenario, sellers might target lower levels as investor sentiment leans toward safe-haven assets like the Japanese Yen.