USD/JPY trades below 154.00 as Tokyo CPI figures remain above BoJ's target

• USD/JPY pulled back from an eight-month high of 154.45 reached on Thursday.
• Tokyo Consumer Price Index and Core CPI each rose 2.8% YoY in October.
• Tokyo's CPI remained well above the BoJ's 2% target, reinforcing expectations of a gradual shift toward tighter monetary policy.

USD/JPY edged lower after reaching an eight-month high of 154.45 in the previous session, trading around 153.80 during the Asian hours on Friday. The pair loses ground as the Japanese Yen (JPY) advances following Tokyo Consumer Price Index (CPI) and Retail Trade data.

Tokyo Consumer Price Index rose 2.8% year-over-year (YoY) in October, following the previous 2.5% increase. Core CPI rose 2.8% YoY, up from 2.5% in the previous two months and exceeding market expectations of 2.6%. The figure stayed well above the Bank of Japan's (BoJ) 2% target, strengthening expectations of a gradual move toward tighter monetary policy.

Japan's Retail Trade unexpectedly increased by 0.5% year-on-year in September, rebounding from a downwardly revised 0.9% decline in August but coming in below market expectations of a 0.7% rise. Meanwhile, preliminary industrial production grew 2.2% month-on-month, surpassing forecasts of a 1.5% gain and recovering from a 1.5% drop in the previous month. This marked the first rise since June and the fastest pace since February.

However, the USD/JPY pair gained ground as the Japanese Yen faced challenges on Thursday after BoJ Governor Kazuo Ueda stated that the economy is recovering at a moderate pace but warned that global trade policies could hinder growth and pressure corporate profits.

The BoJ kept interest rates unchanged at 0.5%, in line with expectations, with the decision passed by a 7-2 vote as board members Naoki Tamura and Hajime Takata again advocated for a hike to 0.75%. The central bank reiterated that it will move toward policy normalization once its economic and inflation targets are met.

The US Dollar advanced after US President Trump announced that tariffs on China would be reduced to 47% from the current 57%. Additionally, he added that the rare earth dispute has been resolved, ensuring no further restrictions on China's rare earth exports.