Japan’s inflation fell to 3.3% from 4.3% today, but the key data was not the CPI, it was the core CPI. Core CPI extended its uptrend to 14 months now and hit 3.5% from 3.2%, above the expectation of 3.4%. Core inflation is being supported by rising wages and a strong services sector. Jibun Bank PMI Services rose to 54.2 for March, showing a fast increase in activity. The Services PMI only fell below 50 just one time in the last 11 months. As Ueda’s term is closing in, the persistence of core inflation and a strong services sector with wage growth might bring a little bit of policy normalization sooner than previously expected.

USDJPY has already been pricing in the looming normalization. Today’s data and safe-haven demand because of the banking turmoil may boost JPY further, especially if the key support level at 130.41 breaks. 130.41 is the middle point of the 2021 dip and 2022 top. USDJPY passed it below at the start of the year, but because of the hawkish FED, it did not last long. Now, a downtrend channel has formed, and a break below might lead prices to 125.33 and, depending on the developments in banking and incoming data, ultimately to the lower line of the channel. However, the markets are too volatile, and too much sudden direction change is happening throughout the globe. If a sudden jump occurs for USDJPY, the 100-day moving average is the first line of defense for USDJPY.