September CPI in Tokyo's 23 wards significantly exceeded market expectations, pushing the yen up to the low ¥158 range against the dollar. Yen buying prevailed against a backdrop of expectations for an additional Bank of Japan rate hike.
In the Tokyo market on the 2nd, the yen traded around 20 sen stronger against the dollar than at 5 p.m. the previous day. Tokyo-area CPI showed stronger-than-expected growth immediately after its release, prompting increased yen buying. Dollar-yen fell to 157.79 at one point.
Tokyo-area CPI, excluding fresh food, rose 2.7% year on year, significantly exceeding the 2.3–2.4% forecast and contributing to yen strength. However, the dollar was supported by elevated after-hours US 10-year Treasury yields, limiting the yen's gains.
During the day, periods of dollar weakness and yen strength alternated with rebounds in the dollar and yen weakness. At noon, dollar-yen was around 157.96, representing yen weakness of approximately 13 sen from the New York market close. There was also a view that caution would increase ahead of the US employment report.
Tokyo-area price trends are expected to influence views on nationwide CPI and the timing of an additional Bank of Japan rate hike. Market interest rates and foreign exchange rates are expected to fluctuate depending on the US employment report.