Tokyo Core CPI expected to ease, Japanese Yen edges higher

The Japanese yen has edged higher on Thursday. In the European session, USD/JPY is trading at 146.99, down 0.27% on the day.

Tokyo core CPI expected to fall to 2.5%

Tokyo core CPI, a key gauge of underlying inflation, is expected to continue to decline. The indicator eased to 2.9% in July and the market estimate for August stands at 2.5%, which would mark a five-month low.

The Tokyo inflation report comes on the heels of Japan's core CPI release, which declined to 3.1% in July from 3.3% a month earlier. Despite the slowdown, inflation remains well above the Bank of Japan's 2% target.

The BoJ has stressed that it is on a path of normalization of monetary policy and plans to raise interest rates. However, the BoJ hasn't hiked rates since January and doesn't appear to be in any rush.

One could make the argument that the central bank has been too slow to tighten policy, as headline inflation has been above the 2% target for over three years. Governor Ueda has repeatedly said that the Bank needs to see higher domestic demand and higher wage growth in order to be assured that inflation remains sustainable at around 2%. The BoJ meets next on September 19.

US GDP expected to be revised upwards

The US releases second-estimate (Preliminary) GDP later today. The first estimate indicated a strong gain of 3.0% in Q2, rebounding from -0.5% in the first quarter. The impressive bounce-back was driven by a sharp drop in imports and stronger consumer spending. The second estimate is expected to show an upward revision of 3.1%.

USD/JPY technical

• USD/JPY has pushed below support at 147.20 and 146.99. Below, there is support at 146.80.
• The next resistance lines are 147.39 and 147.60.