The headline Tokyo ConsumerPrice Index for April rose 1.8% YoY, compared to a 2.6% rise in the previous reading, the Statistics Bureau of Japan showed on Friday. Meanwhile, the Tokyo CPI ex Fresh Food, Energy increased1.8% YoY versus 2.7% expected and the previous reading of 2.9% rise. Additionally, Tokyo CPI ex Fresh Food rose1.6% for the said month, below the market consensus of 2.4%. Market reaction As of writing, theUSD/JPYpair was down 0.01% on the day at 155.63.
When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls. What is the impact of inflation on foreign exchange? Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation.
CPI Inflation Macroeconomics
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