Japanese Yen strengthens as soft US PPI tempers Fed outlook

What happened

The USD/JPY pair fell to near 159.45 during Asian trading on Friday. Softer US PPI data (unchanged in July, revised 0.1% decline in June) boosted expectations the Fed will keep rates unchanged next month. Traders now price in a hike in October or December, while the BoJ is likely to raise rates in September or October.

Why it matters

US-Japan 2-year rate differentials narrowed sharply in 2025 as the BoJ raised rates, yet USD/JPY moved higher, suggesting policy adjustments alone may not reverse Dollar strength.