• The Japanese Yen appreciates as increasing Tokyo inflation figures strengthen the BoJ’s hawkish stance on its policy outlook.
• Tokyo's CPI rose to 2.6% YoY in August, up from 2.2% in July.
• The US Dollar holds its ground following stronger-than-expected economic data from Thursday.

The Japanese Yen (JPY) retraces its recent gains against the US Dollar (USD) following the Tokyo Consumer Price Index (CPI) data released on Friday. The increase in Tokyo inflation strengthens the Bank of Japan’s (BoJ) hawkish monetary policy stance, supporting the JPY and putting downward pressure on the USD/JPY pair.

Tokyo's Consumer Price Index (CPI) increased to 2.6% year-on-year in August, up from 2.2% in July. Core CPI also rose to 1.6% YoY in August, compared to the previous 1.5%. Additionally, Japan’s Unemployment Rate unexpectedly climbed to 2.7% in July, up from both the market estimate and June's 2.5%, marking the highest jobless rate since August 2023.

The downside for the USD/JPY pair may be capped, as the US Dollar maintains its recent gains following stronger-than-expected economi<wbr>c data released on Thursday. However, dovish remarks from the Federal Reserve could constrain further gains for the Greenback.