The Japanese Yen (JPY) builds on last week's strong gains against its American counterpart and drags the USD/JPY pair below the 149.00 mark, or the lowest level since early December during the Asian session on Monday. Japan's strong Consumer Price Index (CPI) released on Friday comes on top of the upbeat Q4 Gross Domestic Product (GDP) growth report last week. This, along with expectations that sustained wage gains would spur consumer spending, suggests that the Bank of Japan (BoJ) might hike interest rates more aggressively than initially thought and continue to underpin the JPY.

Apart from this, the emergence of fresh US Dollar (USD) selling benefits the JPY and contributes to the USD/JPY pair's slide for the fourth straight day – marking the seventh day of a negative move in the previous eight. Meanwhile, BoJ Governor Kazuo Ueda showed readiness to ramp up government bond buying if long-term interest rates rise sharply. This, in turn, leads to a further pullback in the Japanese government bond (JGB) yields, from a multi-year peak touched last week, which prompts some intraday JPY selling and assists the currency pair in rebounding over 50 pips from the daily low.
Japanese Yen bulls retain control amid hawkish BoJ expectations
Data released on Friday showed that Japan's core inflation touched a 19-month high in January and reinforced expectations that the Bank of Japan will keep raising interest rates.
BoJ Governor Kazuo Ueda warned on Friday that the central bank could increase bond buying if abnormal market moves trigger a sharp rise in the government bond yields.
The yield on the benchmark Japanese government bond (JGB) retreats further from its highest level since November 2009 set last week and caps gains for the Japanese Yen.
A disappointing sales forecast from Walmart raised doubts about US consumer health and drags the US Dollar to over a two-month low during the Asian session on Monday.
The flash S&P Global US Composite PMI dropped to 50.4 in February, from 52.7 in January, pointing to a weaker expansion in overall business activity across the private sector.
Separately, the University of Michigan reported that its US Consumer Sentiment Index dropped more than expected, from 71.7 previous to 64.7 in February, or a 15-month low.
Moreover, households saw inflation over the next year surging to 4.3% — the highest since November 2023 — and running at 3.5% — the highest since 1995 – over the next five years.
Federal Reserve officials remain wary of future interest rate cuts amid sticky inflation and the uncertainty over US President Donald Trump's tariff plans and protectionist policies.

Source: Fxstreet