Inflation’s ticking higher again in Japan and traders are starting to pay attention. The latest CPI data showed core inflation rising to 2.9% in September, marking the first uptick since May and keeping pressure on both policymakers and the newly appointed Prime Minister, Sanae Takaichi. For a country that’s battled decades of deflation, this isn’t just a data point, it’s a wake-up call.
The market’s immediate reaction? The yen found some strength, but not enough to shake off its bearish structure entirely.
Here’s what you need to know:
1. Inflation Still Hot, Just in a Different Way
Something for everyone in Japan's September CPI release. Headline inflation is near 3% and rising! Core inflation is near 1% and falling!
— #East Asia Econ (#@eastasiaecon)
2:32 AM • Oct 24, 2025
The rise in “core” inflation which includes energy but excludes fresh food came in exactly as forecasted. But the “core-core” gauge, which strips out both food and energy, actually eased to 3% from 3.3%. That means the headline bump might be more about energy and cost pass-through than a broad inflation surge.
Still, inflation’s been above the Bank of Japan’s 2% target for 41 straight months, a streak that’s stretching patience at the BOJ.
2. Policy Pressure Builds Under Takaichi’s Watch
Japan’s key price measure picked up pace, underscoring challenges for new Prime Minister Sanae Takaichi and keeping the Bank of Japan on track for further rate hikes
— #Bloomberg (#@business)
11:56 PM • Oct 23, 2025
Takaichi’s first challenge as Prime Minister is already taking shape: inflation control. Experts are calling this her “litmus test.” She’s reportedly preparing a ¥13.9 trillion stimulus package (≈ $92 billion) to help households handle rising costs while supporting key industries.
But politics and monetary policy rarely move in sync. The BOJ remains cautious, Deputy Governor Uchida recently said the bank could raise rates again if data stays on course.
3. USD/JPY Watch: Eyes on 153.00 and Beyond
On the charts, USD/JPY is trading near 152.97, holding just below a key resistance zone at 153.05 (see chart).
A clear breakout above that level could open the door toward 157.97, last seen during Japan’s 2022 intervention era.
Support rests near 149.50, with trendline confluence around 148.90–147.60, offering a potential retest zone if the yen strengthens.
Technically, the trend remains bullishbut with inflation heating up and policymakers hinting at action, we should stay alert for volatility spikes or surprise jawboning from Tokyo.
Here’s my takeaway:
Japan’s inflation comeback is more than just a data blip, it’s a political and market narrative colliding. For Takaichi, it’s her first big test.
For us traders, USD/JPY near 153.00 is more than just resistance, it’s a crossroads between policy patience and market pressure.