USD/JPY weakens below 147.00 after Japan’s Tokyo CPI inflation data

• USD/JPY softens to around 146.85 in Friday’s early Asian session.

• Japan’s Tokyo August Core CPI rose 2.5% YoY in August, matching the forecast. 

• The US economy grew at a 3.3% annualized rate in the second quarter of 2025.

The USD/JPY pair loses ground to near 146.85 during the early Asian session on Friday. The Japanese Yen (JPY) edges higher against the US Dollar (USD) after the release of Japan’s Tokyo August Consumer Price Index report. The attention will shift to the  US July Personal Consumption Expenditures (PCE) Price Index report, which is due later on Friday. 

Data released by the Statistics Bureau of Japan on Friday showed that the headline Tokyo CPI rose 2.6% YoY in August versus 2.9% prior. Meanwhile, Tokyo's core CPI inflation eased to 2.5% YoY in August from 2.9% in July, matching market forecasts.

As of August 29, 2025, Tokyo's August core consumer price index (CPI) has eased to 2.5% year-on-year, matching market forecasts. The Tokyo CPI ex Fresh Food and Energy, which is closely watched by the Bank of Japan (BoJ), rose 3.0% YoY in August, compared to the previous reading of 3.1%.

These Tokyo inflation reports keep alive market expectations of a resumption in interest rate hikes, supporting the Japanese Yen. Nearly two-thirds of economists polled by Reuters in August anticipate the BoJ to raise its key interest rate by at least 25 basis points (bps) again later this year, up from just over half a month ago.

On the other hand, the stronger-than-expected US Gross Domestic Product (GDP) for the second quarter (Q2) might lift the USD. The US economy grew at a 3.3% annualized rate in Q2, a faster pace than initially estimated, driven by a pickup in business investment and an outsize boost from trade.

Traders will take more cues from the US PCE inflation report on Friday, as it will be the final inflation data before the Federal Reserve's (Fed) September meeting. The headline PCE is expected to show an increase of 2.6% YoY in July, while the core PCE is estimated to show a rise of 2.9% during the same period.