The USD/JPY pair has paused its decline, and the Japanese yen has stopped its rise after the release of softer consumer inflation data in Tokyo. A government report published today showed that the headline Consumer Price Index (CPI) in Tokyo, Japan's capital, slowed from 1.5% in the previous month to 1.4% in March, marking the lowest level since March 2022. The core indicator, which excludes volatile fresh food prices, also declined in March—to 1.7% from 1.8% in February. Additionally, the index excluding both fresh food and energy rose by 2.3% year-on-year, compared to 2.5% the month before.

These figures reduce the likelihood of an immediate rate hike by the Bank of Japan and increase pressure on the yen, especially amid economic risks associated with the war involving Iran. Against this backdrop, and supported by the continued strength of the US dollar, the USD/JPY pair is receiving additional support. At the same time, market participants have already fully priced in further rate cuts by the US Federal Reserve and are rapidly increasing expectations of rate hikes toward the end of the year, driven by concerns that the military conflict could intensify inflationary pressures and push the dollar to a new high since the beginning of the year.

Meanwhile, Japan's Vice Minister of Finance for International Affairs, Atsushi Mimura, delivered the strongest signal to date, stating that authorities are ready to take decisive action if speculative movements in the currency market continue. In addition, Bank of Japan Governor Kazuo Ueda noted that the central bank will closely monitor exchange rate dynamics, reinforcing expectations of possible intervention to curb the weakening of the national currency. This has prevented yen bears from expanding positions but has also limited further upward potential for USD/JPY.

From a technical perspective, the short-term outlook remains moderately bullish, as the USD/JPY pair is trading well above the rising 200-day simple moving average (SMA) and above all major moving averages. Oscillators are positive, confirming the dominance of bulls in the market. The nearest support is at the 9-day EMA. If this level fails to hold, prices could accelerate their decline toward the 20-day SMA. However, a break above 160.00 would lead to a retest of the March high.