USD/JPY rises as Japan inflation hits 2-year high, yen remains weak

USD/JPY advanced 0.4% to trade above 157.20 as the Japanese yen failed to capitalize on stronger-than-expected inflation data. Japan's core inflation accelerated to a 2-year high of 2.8% year-over-year in April, surpassing the Bank of Japan's 2% target and market expectations of 2.6%. Despite the robust inflation reading, the yen remained under pressure due to the significant interest rate differential between the US and Japan. The Federal Reserve's higher-for-longer stance contrasts sharply with the BoJ's ultra-accommodative policy, maintaining downward pressure on the yen. Technical indicators show USD/JPY testing resistance at 157.50, with momentum indicators suggesting further upside potential. Support sits at 156.80 (previous day's low). Traders are monitoring any shifts in BoJ rhetoric regarding policy normalization, though immediate intervention appears unlikely below the 160 threshold.