Fundamental Market Analysis for October 23, 2026 USDJPY
USDJPY:
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Accelerating inflation in Japan strengthens the case for further Bank of Japan rate hikes. The September core CPI, excluding fresh food, rose 2.1% year-on-year after 1.7% in August. The measure excluding both fresh food and energy accelerated to 2.4% from 1.9%. This supports the yen through expectations of higher cost of money, although an immediate decision by the regulator is not predetermined.
At the same time, concerns over artificial intelligence spending have boosted demand for safe-haven assets. Purchases of Treasury bonds lowered US yields, weakening one of the main arguments for the dollar against the yen. For USDJPY, the key combination is two factors: declining dollar investment yields and more compelling grounds for further Japanese policy tightening.
Against a decline in the pair are the persistent interest rate differential and the risk of renewed US yield growth due to expensive oil. At its next meeting, the Bank of Japan may take a pause, so the inflation report does not guarantee continued yen strengthening. With sustained demand for safe-haven assets, however, its fundamental advantages still allow for further USDJPY downside.
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