USD/JPY Climbs as Japan's Slowing Inflation Reduces BOJ Hike Pressure

USD/JPY is trading higher as softer-than-expected Japanese inflation data eases market expectations for near-term Bank of Japan monetary tightening. The pair has advanced as traders recalibrate their positioning on the BOJ's rate path, with slowing consumer price growth reducing the urgency for additional rate hikes. The data undermines the narrative that had supported yen strength in recent months, where rising inflation was seen as a catalyst for the BOJ to continue normalizing policy. Meanwhile, gold prices in USD terms have also reacted to the shifting rate differential outlook. EUR/USD is seeing secondary effects as the dollar's relative strength against the yen influences broader greenback sentiment. From a technical standpoint, the pair faces resistance at recent swing highs, while support is anchored near previous consolidation zones. The divergence between a still-hawkish Federal Reserve and a potentially more patient BOJ widens the interest rate differential argument in favor of USD/JPY upside. Traders should watch for upcoming BOJ commentary and US economic data for further directional confirmation.