Daily Fundamental Analysis: Japan’s Inflation Climbs to Highest Level in More Than Two Years

Japan’s core inflation hit 3.5% in April, amid the consideration from Bank of Japan to pause rate hikes due to U.S. tariffs. Core inflation exceeded the expected 3.4%, up from March’s 3.2%, reaching its highest since January 2023. Headline inflation remained at 3.6%, above the BOJ’s 2% target. Bank of Japan Governor Ueda signals rate hikes while monitoring U.S. tariff impacts.

Inflation is expected to ease due to lower oil prices and a stronger yen. U.S. tariffs and summer utility subsidies may further reduce prices. The yen gained 0.15% to 143.80, while the Nikkei 225 showed modest gains. Expectations points at another BOJ rate hike in October.

The U.S. and China agreed to maintain open communication after senior officials held talks Thursday, working toward a broader deal. The talks follow a recent Geneva meeting where both sides agreed to temporarily reduce tariffs.

Asia-Pacific markets rose Friday amid regional economic data updates. Japan’s benchmark Nikkei 225 rose 1.04%, South Korea’s Kospi gained 0.36%, and Australia’s S&P/ASX 200 added 0.33%. Hong Kong and China markets opened flat.

U.S. futures remained steady amid Treasury yield concerns. Dow futures added 0.03%, while Nasdaq futures dipped slightly and S&P 500 futures rose 0.03%.

And in the U.S. bond market, The 30-year Treasury yield surpassed 5% for two consecutive days, reaching 5.088%. The 10-year yield rose 15 basis points this week. The Treasury selloff follows April’s exodus from U.S. assets due to declining investor confidence.

And in the Forex market, The U.S. dollar declined against major currencies. The GBPUSD rose to its highest level since September 2024. USDJPY continues to trade below 144.00. And the EURUSD remains bullish targeting the 1.1400 level.