US January CPI Strengthens Rate Cut Expectations, Yen Likely to Remain in Range in the Future — W59 Overseas Macro Insights

U.S. January CPI rose 0.2% month-over-month, below expectations, and the year-over-year growth rate slowed to 2.4%. Market expectations for a Federal Reserve rate cut have increased accordingly. Core goods inflation remained largely flat, while core services increased month-over-month.

To sustainably reverse yen weakness, it will depend on the Bank of Japan's hawkish stance, government fiscal discipline, and the advancement of structural reforms. Japan's $550 billion investment plan in the U.S. is about to be implemented, and the market will focus on the balance of foreign exchange flows. The USD/JPY is expected to fluctuate in the 150-155 range in the coming months, but renewed upward pressure may appear after the mid-March U.S.-Japan summit.