EBC Markets Briefing | ​Yen strengthens on hot inflation

The yen edged up on Friday, on course for a 1.4% increase for the week. Japan's core inflation grew at the fastest annual pace in more than two years, which helped fuel rate hike expectations.

US Treasury Secretary Scott Bessent and Japanese Finance Minister Katsunobu Kato agreed on Wednesday that the dollar-yen exchange rate currently reflects fundamentals.

Asian currencies surged this month saw sharp swings on market speculation about possible US pressure to prop up their currencies in their tariff talks. The yen has increased about 9% in 2025.

Yields on long-dated Japanese government bonds rose to new records this week in the wake of a poor auction result that cast doubt over debt sales looming in the weeks ahead.

JGBs have been under pressure after a dramatic sell-off in March triggered by a slide in German bunds. Recently, several political parties are calling for consumption tax cuts, further denting the asset's appeal.

The BOJ has refrained from tightening for the time being given deadlocked trade talk with the US and struggling bond markets. The yen's strength mainly stemmed from the greenback weakness.

The yen rallied after hitting the low of 144.33 per dollar, and the path of least resistance is heading towards 143 per dollar. But the upside room could be limited.

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