USD/JPY drops 0.5% as Japan's core inflation exceeds expectations

USD/JPY has declined 0.5% (72 pips) to 143.85 following Japan's core inflation data, which exceeded market expectations and reinforced prospects for Bank of Japan policy tightening. Core CPI excluding fresh food rose 2.7% year-over-year in April, surpassing the consensus forecast of 2.5% and marking the highest reading in three months. The stronger inflation figures have intensified speculation that the BoJ may accelerate its exit from ultra-loose monetary policy, potentially raising rates sooner than anticipated. Market participants are now pricing in a 65% probability of a rate hike by July, up from 45% before the data release. The yen's strength was broad-based, with crosses also under pressure as traders reassess the interest rate differential outlook. Technical analysis shows USD/JPY testing support at the 50-day moving average near 143.70, with a break below potentially accelerating losses toward 143.00.