Published on: 2025-10-23
Japan releases its September inflation figures tomorrow morning, October 24, at 8:30 AM Japan Standard Time (7:30 AM GMT+8, or 23:30 GMT the previous evening).
Economists forecast core consumer prices to climb 2.9% from a year earlier, marking the first monthly acceleration in four months. The data arrives just days before the Bank of Japan's crucial October 29-30 policy meeting, where officials will decide whether to raise interest rates.
For traders watching USD/JPY, which currently sits near 152.40, the announcement could trigger significant moves depending on whether inflation meets, beats, or misses expectations.
The Statistics Bureau publishes the Consumer Price Index at precisely 8:30 AM local time on Thursday. The headline figure excludes fresh food prices but includes energy costs, giving policymakers and traders a clearer picture of underlying price pressures.
September's expected 2.9% reading would reverse three consecutive months of deceleration. August's figure came in at 2.7%, down from 3.1% in July.
Despite the recent slowdown, inflation has remained above the Bank of Japan's 2% target for more than three years. [1]
Analysts at SMBC Nikko Securities point out that September's comparison looks somewhat distorted. Last year, during the same month, energy prices fell sharply after the government introduced utility and gas subsidies.
This base effect makes the year-on-year comparison appear stronger than the actual momentum in price increases.
Food costs continue driving much of the inflation story. These sustained increases reflect companies passing higher raw material and labour costs onto consumers.
Core-core inflation, which strips out both fresh food and energy, stood at 3.3% in August, showing persistent underlying price pressures.
Bank of Japan Governor Kazuo Ueda said last week that officials will examine additional data before making their rate decision at the upcoming meeting.
The central bank currently holds its benchmark short-term rate at 0.5%, the highest level since 2008.
Market participants widely expect another 25 basis point increase at the October gathering. A Reuters poll of economists shows 56% expect a rate hike by year-end, with October being the most likely timing.
Two board members already dissented at the September meeting, voting for an immediate hike. Those internal divisions suggest growing impatience with the current policy stance.
The bank will release updated quarterly forecasts for growth and prices during the October session. These projections typically carry significant weight in shaping rate decisions.
Officials have indicated they want wage growth to broaden price pressures beyond goods and into services. [2]
Tokyo's September inflation figures, released earlier as a leading indicator, came in at 2.5% for the core measure. That matched August's pace but fell short of the 2.8% forecast.
The miss raised questions about whether nationwide data would similarly disappoint.
The dollar-yen pair traded at 152.38 on October 23, gaining 0.25% from the previous session. Over the past month alone, the yen has weakened 2.46% against the greenback.
The pair now approaches levels that historically trigger verbal intervention from Japanese officials.
| Price Level | Significance |
|---|---|
| 156.97 | Primary resistance; historical intervention zone |
| 152.50 | Immediate resistance; current testing level |
| 152.00 | Psychological resistance; intervention risk increases |
| 151.50 | Near-term support; October buying zone |
| 149.49 | Year-end forecast target |
| 147.54 | Strong support; would require a policy shift |
| 145.35 | 12-month forecast level |
Several factors have pressured the yen lower in recent weeks. The interest rate gap between Japan and the United States remains wide, making dollar-denominated assets more attractive.
Political uncertainty following recent elections has also weighed on the currency. Prime Minister Sanae Takaichi's administration is preparing a large economic stimulus package to address inflation concerns, which traders interpret as potentially delaying BOJ tightening.
Tomorrow's data release presents three distinct outcomes, each with different implications for currency positioning.
| CPI Reading | Expected USD/JPY Move | BOJ Rate Hike Odds | Trading Implication |
|---|---|---|---|
| Above 3.0% | Break below 152, target 149–150 range | 80%+ for October meeting | Yen strength accelerates; bond yields rise; JPY crosses reverse |
| 2.9% (Consensus) | Consolidation 151.50–153.00 | 60% for the October meeting | Range-bound trading until BOJ meeting; wait for additional signals |
| Below 2.7% | Rally toward 153–154 | 30% or lower; possible December delay | Dollar strength resumes; yen weakness extends; carry trades return |
If core CPI meets the 2.9% forecast, USD/JPY will likely consolidate near current levels as markets digest the data and await BOJ guidance. A reading above 3.0% would strengthen the case for immediate policy action and likely pressure the pair below 152.
Conversely, inflation coming in at 2.7% or below would complicate the BOJ's plans and could send USD/JPY rallying toward 153 or higher.
From a chart perspective, USD/JPY remains in an uptrend on longer timeframes. The 50-week simple moving average continues to provide support around 148.50.
Key technical observations include:
Momentum indicators: Mixed signals with recent gains facing resistance from previous highs
Moving averages: Price trading above 20-day and 50-day EMAs, confirming short-term bullish bias
Volume patterns: Suggest caution among larger participants ahead of tomorrow's data
JPY cross correlation: EUR/JPY and GBP/JPY showing 80-85% correlation; watch for confirmation signals
Options markets show significant interest clustering around 150 and 155 strikes for November expiry, indicating where professional traders expect the range to hold.
Volatility typically spikes around major economic releases, and tomorrow's CPI announcement ranks as a tier-one event for yen pairs. Consider these specific tactics:
Timing: Watch for spread widening between 8:25-8:35 AM JST; initial moves may reverse within 5-10 minutes as algorithms digest the full report
Position sizing: Reduce exposure by 30-50% before the release to manage overnight risk
Stop placement: Set stops at least 40-50 pips from entry, given expected volatility; tighter stops risk premature triggering
Cross-pair confirmation: Monitor EUR/JPY and GBP/JPY for directional confirmation before adding to positions
Session awareness: Asian markets drive initial price action; European traders enter 2-3 hours after the release
The timing places Tokyo and Sydney desks in a prime position to react first, with liquidity concentrated in the Asian session.
Tomorrow's inflation release carries outsized importance for USD/JPY traders, with the 2.9% consensus forecast sitting right on the line between justifying another rate hike and giving the BOJ pause.
Even small deviations from expectations could trigger substantial currency moves given current positioning.
With USD/JPY hovering near 152.40 and the October 29-30 policy meeting days away, both technical levels and fundamental catalysts align to create a potentially decisive moment for the pair.
The September CPI data will either reinforce expectations for BOJ tightening or force markets to recalibrate their rate path assumptions. [3]
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment, or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction, or investment strategy is suitable for any specific person.
[1] https://mainichi.jp/english/articles/20250919/p2g/00m/0bu/007000c
