Japan Back From Holidays, Tokyo CPI Accelerates

USD/JPY crept higher Thursday, returning to a weekly gain, with Japanese financial markets closed for the final day of Golden Week holidays. Broader demand for the greenback drove the upswing, as BoJ/Fed policy divergence keeps favouring the dollar.

• Thursday saw a notable move higher in USD/JPY risk reversals, with 3-month tenor rallying to 0.49 vol, its highest point since mid-2015.
• While Japanese markets re-open today, it is likely that liquidity will be limited by absences at some desks, with locals often using their annual leave around the three public holidays in the middle of the week.
• Tokyo CPI, widely considered a bellwether of national prices, has just hit the wires. Core price growth accelerated to +1.9% Y/Y, marginally overshooting BBG median estimate of +1.8%.
• Key releases next week include wage data (Monday), household spending (Tuesday) as well as BoP current account balance & Eco Watchers Survey (Thursday).
• In addition, the BoJ will publish the minutes from its March monetary policy meeting on Monday, before releasing the summary of opinions from the April meet.
• USD/JPY trades at Y130.27, up 7 pips on the day, with bulls looking for a break above Apr 28 high of Y131.25. Bears set their sights on key support from Apr 27 low of Y126.95.