FX.co ★ Japanese Yen Weakens as Inflation Eases

The Japanese yen weakened beyond 155 per dollar on Friday, declining for a third straight session as both headline and core inflation slowed in January amid government efforts to ease cost-of-living pressures. Headline inflation fell to 1.5% from 2.1%, its lowest level since March 2022, while core inflation eased to the Bank of Japan’s 2% target, the slowest pace in two years. This gives the central bank greater flexibility to delay interest rate hikes, especially in light of last quarter’s lackluster economic rebound. At the same time, Prime Minister Sanae Takaichi is set to open the new parliamentary session with plans to ramp up strategic investment, pursue “active but responsible” fiscal policy, and advance a more assertive diplomatic agenda. The yen is on track to lose about 1.6% this week, erasing roughly half of the gains made after Takaichi’s landslide election victory the previous week.