The Japanese Yen strengthens in the wake of speculations for a December BoJ rate hike

The Statistics Bureau of Japan reported on Friday that the headline Tokyo Consumer Price Index (CPI) surged 2.6% year-on-year in November as compared to 1.8% in the previous month.

Meanwhile, core CPI, which excludes volatile fresh food items, rose 2.2% YoY and a gauge that strips out both energy and fresh food costs also climbed by 2.2% during the reported month. 

A separate report showed Japan's Unemployment Rate edged higher as expected, to 2.5% in October and Retail Sales grew 1.6% YoY as compared to 0.5% in September and 2.2% expected. 

Adding to this, Japan's Industrial Production registered strong growth of 3% in October as compared to 1.6% in the previous month, though the reading was short of the 3.9% rise anticipated. 

Nevertheless, stronger inflation figures continue to fuel speculations that the Bank of Japan (BoJ) will hike interest rates again at its next monetary policy meeting in December. 

Adding to this, worries that US President-elect Donald Trump's trade tariffs will affect the global economy and the protracted Russia-Ukraine war weigh on the market sentiment. 

The US bond investors cheered the nomination of Scott Bessent, who is seen as a fiscal conservative and will likely want to keep a leash on US deficits, as the US Treasury Secretary. 

This keeps the benchmark 10-year US Treasury bond yields and the US Dollar depressed near a two-week low, which is seen exerting additional pressure on the USD/JPY pair.