• USD/JPY gained modestly on Friday as softer inflation in Japan reduced the urgency for the BOJ to tighten monetary policy.
• Japan's annual core inflation slowed to a four-year low in April, driven by government subsidies on fuel and education costs, data showed on Friday. However, analysts expect escalating Middle East tensions and rising energy prices to push inflation higher in the coming months.
• Japan's core consumer price index (CPI), which excludes volatile fresh food prices, rose 1.4% in April from a year earlier, slowing sharply from March's 1.8% increase and missing the median market forecast of a 1.7% gain.
• The data will be among the key factors scrutinised by the Bank of Japan at next month's policy meeting, where the board is widely expected to raise its short-term policy rate to 1% from 0.75%.
• Junko Koeda said on Thursday she was closely monitoring the speed and extent of the pass-through from wholesale prices to consumer inflation when assessing the pace and timing of future interest rate hikes by the Bank of Japan.
• Immediate resistance is located at 159.35 (38.2%fib), any close above will push the pair towards 160.00 (Psychological level).
• Support is seen at 158.61 (May 20th low) and break below could take the pair towards 158.21(Lower BB).
Recommendation: Good to buy around 159.00, with stop loss of 158.50 and target price of 159.60
