USD/JPY Resilient To US Yield Dip, National CPI Due Out Shortly

USD/JPY is just under 135.90 currently, very close to overnight highs. Overnight dips into the 134.60/70 region were supported. Current USD/JPY levels are a little higher relative to overnight US yield momentum, which faltered at the short end (2yr down 9bps to just under 3.20%). The 10yr was only down a touch to 2.88%, but there is a modest wedge with current yen levels. The domestic focus is firmly on national CPI data for July, due out shortly.

• The market expects headline YoY to print at 2.6%, from 2.4% previously. Ex fresh food is forecast at 2.4% (from 2.2% prior), ex energy 1.1% from 1.0% in June.
• With the Tokyo CPI figures already out for August, today's print may not move market sentiment a great deal. This release continued to show upside momentum in headline measures (2.5% YoY), and ex food 2.3%.
• With core inflation (ex energy) nto expected to print much above 1.0%, the debate around a potential BoJ policy shift may remain a slow burner, at least in the near term .
• Elsewhere the firmer equity backdrop likely weighed on JPY at the margin, along with higher oil prices. Recall earlier this week Japan's weaker than expected trade figures.