JPY: Slower inflation delays JPY gains – ING

The Japanese Yen (JPY) has been the only G10 currency losing against the dollar since the start of June, with the key driver being a dovish reassessment of Bank of Japan rate expectations after the latest meeting, ING's FX analyst Francesco Pesole notes.

Yen remains broadly attractive

"Tokyo’s June CPI data released this morning carried the potential for a revamp in hawkish bets, but the print was softer than expected, at 3.1% for both core and headline inflation versus the expected 3.1%."

"While the figures are still above the BoJ’s supposed tolerance level, they mark a potential inflection point that endorses a more cautious approach to monetary tightening. Retail sales figures for May also showed a MoM contraction."

"The Yen remains, however, broadly attractive in our view. Our model shows USD/JPY is now trading below its near-term fair value of 144.0, and the upcoming risk of tariff-related turmoil in July, plus limited room for further dovish repricing in BoJ expectations, suggest a retest of early-June 142.4 lows looks very much possible."