USD/JPY pressured as Japan PPI cools but oil risks cloud yen outlook

USD/JPY faces mixed signals as Japan's February wholesale inflation data came in softer than expected, while geopolitical risks from the Iran conflict threaten to reignite price pressures. Japan's corporate goods price index rose 2.0% year-over-year in February, slightly below the 2.1% consensus forecast and down from January's 2.3% reading, marking a third consecutive month of easing. However, import prices surged 2.8% year-over-year, the fastest pace since July 2024, driven by the weak yen amplifying commodity costs. Government fuel subsidies have partially offset rising energy prices, but escalating oil prices tied to Middle East tensions could undermine this cushion. The Bank of Japan remains in focus as persistent imported inflation via the weak yen could support the case for further policy normalization. For traders, the interplay between softer domestic PPI and rising import costs creates a tug-of-war for yen direction. A sustained oil price rally would likely weigh further on the yen through higher import bills, while any BOJ hawkish signals could provide near-term yen support. Key levels and upcoming CPI data will be critical for positioning.