Yen remains pinned near 158.00 ahead of Japan’s inflation figures

• The range in place since 1 October holds as USD/JPY finishes near 158.00 once more.
• A BoJ rate rise on 30 October carries a probability below 5% in swaps, against roughly 80% for 18 December.
• Thursday brings Japan's national CPI release before the BoJ decides policy on 30 October.

From around 158.50, USD/JPY dropped to its session low on Tuesday before retracing roughly half the decline, leaving it close to its usual closing level for October. Neither lower crude oil prices nor dollar weakness elsewhere offered the yen much support.

Underlying inflation is very close to the 2% target, Bank of Japan (BoJ) Governor Ueda told parliament on Monday. Following those remarks, swaps traders priced a probability below 5% of an increase from 1.25% on 30 October, compared with around 80% for 18 December. For yen buyers, that leaves no BoJ rate rise to price in ahead of December.

Responsibility for the yen's weakness was rejected by Prime Minister Takaichi, while Finance Minister Katayama said on 15 October that Japan stood ready to intervene again in the currency market. USD/JPY reached its highest level since that warning on Tuesday, just above 158.50, but failed to sustain it.

Japan's Trade and Inflation Releases Lead the Calendar

Exports are forecast to have risen 20.1% year on year, following 19.3%, when Japan publishes its September trade data at 23:50 GMT on Tuesday. Thursday's national CPI release, excluding fresh food, is due at 23:30 GMT. The forecast is 2.1%, up from 1.7%, placing the BoJ's 2% target between the previous and expected readings.

Friday's University of Michigan release at 14:00 GMT is expected to show one-year inflation expectations steady at 4.7% and five-year expectations at 3.5%. These will be the final US inflation readings ahead of the Fed's policy decision on 28 October, which comes two days before the BoJ's decision.

USD/JPY Closes Remain Clustered Around 158.00

Since 1 October, not a single daily close has strayed more than 75 pips from 158.00. The 50-day Exponential Moving Average (EMA) also sits within a few pips of that level, while the 200-day EMA lies just above 157.50. October's trading range extends from slightly below 157.00 to slightly below 159.00.

USD/JPY: Daily Price Chart