By George Pavel General Manager at Naga.com Middle East
May 31 2025:
The Japanese yen extended gains for a second session, ed by stronger-than-expected core inflation data in Japan that has renewed expectations of further Bank of Japan (BoJ) rate hikes. Tokyo’s core consumer price index rose 3.6% year-on-year in May, the fastest pace in more than two years, pointing to persistent inflationary pressures. BoJ Governor Kazuo Ueda reaffirmed the bank’s commitment to its 2% inflation target. This firm stance has lent to the yen as markets increasingly price in a rate increase in July.
Meanwhile, the yen found additional backing from safe-haven demand following a U.S. appeals court’s decision to reinstate reciprocal tariffs introduced by the Trump istration, heightening trade tensions.
Should inflation prove persistent and wage growth durable, further monetary tightening appears likely, which would the currency. However, economic difficulties and trade uncertainties may restrain the pace of tightening, limiting the yen’s appreciation. Safe-haven flows linked to global trade tensions may also intermittently strengthen the yen.