When is the Tokyo CPI release, and how could it affect USD/JPY?

Tokyo CPI inflation Overview

The Tokyo Consumer Price Index (CPI) inflation print, due at the tail end of the Thursday market session at 23:30 GMT, will give markets the latest peek at how Japanese inflation is ticking away under the hood. The Tokyo-focused CPI release on Thursday leads the national CPI figures by a couple of weeks, and serves as an advance bellwether of how Japanese inflation is reacting, or not reacting, to Bank of Japan (BoJ) monetary policy.

The BoJ has been trapped in a hyper-easy monetary policy stance for decades, with Japan's main reference rate stuck below 1% since September 1995. With the BoJ struggling for almost a third of a century to re-ignite Japanese inflation, overly-cautious central bank policymakers are looking for clear signs that inflation will rise enough to warrant defensive interest rate hikes.

August's headline Tokyo CPI, which is expected to ease to 2.5% YoY, last came in at 2.9%, with core-core Tokyo CPI (headline CPI inflation minus food and energy prices) last clocking in at 3.1%.

How could Tokyo CPI inflation affect USD/JPY?

Japanese inflation metrics have taken on a key role in Yen markets, as JPY bidders look for signs that the BoJ will finally be knocked off of its low-rate stance. As noted by MarketPulse's Kenny Fisher: "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.

At the current trajectory, interest rate markets aren't expecting BoJ interest rates to move above 0.75% until March 2026 at the earliest. USD/JPY is still stuck in a multi-month consolidation phase, albeit on the low end, and testing just below 147.00.