Japan's wholesale prices rose 2.0% year-on-year in February, below the market expectation of 2.1% and down from January's 2.3%, marking the third consecutive month of slowing growth. Government fuel subsidies have partially eased upward pressure on goods prices, while analysts warn this relief may be temporary—escalating Middle East tensions could drive another surge in oil prices, rekindling inflation. The Corporate Goods Price Index (CGPI), which measures prices of goods and services traded between businesses, reflects this slowdown. However, Bank of Japan (BOJ) officials noted that the data already partially factors in rising geopolitical risks, such as higher non-ferrous metal prices amid regional tensions. Meanwhile, Japan's import price index, measured in yen, jumped 2.8% year-on-year in February. It stayed well above January's revised 0.7% and the largest increase since July 2024, highlighting how a weaker yen is pushing up import costs. Oil prices spiked recently but plummeted over 11% after U.S. President Trump said a war with Iran might end soon, easing supply disruption fears. Analysts caution that sharp volatility in oil and other commodities could still gradually feed into domestic inflation via business costs. Additionally, economists pointed out that such cost-push inflation may hinder the BOJ from further rate hikes in the short term, as the central bank prioritizes sustainable inflation supported by demand and wage growth. The BOJ ended its decade-long massive stimulus program in 2024 and has raised rates multiple times, including a December hike to 0.75%, a 30-year high. It has signaled readiness to continue tightening if Japan achieves its 2% inflation target, backed by rising demand and wages. Escalating Middle East conflicts and disruptions to tanker traffic through the Strait of Hormuz have renewed focus on Japan's energy vulnerability: roughly 95% of its crude oil and 11% of liquefied natural gas (LNG) come from the Middle East, with ~70% of crude and 6% of LNG transported via the Strait. The Renewable Energy Institute notes that a halt to fossil fuel imports would severely impact Japan's power plants and transportation systems, urging reduced reliance on imported fuels. Marking the 15th anniversary of the Fukushima Daiichi nuclear disaster, an event that reshaped Japan's energy security mindset, the institute argues nuclear power is not a long-term solution, as large centralized facilities are vulnerable to missile or drone attacks in modern warfare. In contrast, decentralized renewable systems (solar, wind, battery storage) are more resilient, as single attacks cannot cripple the entire grid, while Japan has latent advantages in these world's cheapest power sources. Accelerating renewables could boost energy independence and economic resilience.

On the USD side, released Wednesday, the U.S. Labor Department data revealed that February CPI rose 2.4% YoY (matching expectations and January's pace), and the monthly CPI was 0.3% (in line with forecasts, slightly above January's 0.2%). Core CPI held steady at 2.5% year-on-year—the slowest pace in nearly five years—while monthly core CPI slowed from 0.3% to 0.2%, both meeting expectations. While core inflation cooled as anticipated, Middle East tensions have driven up oil, gasoline, and fertilizer costs. Citibank warns that near-term energy-driven inflationary pressures are "almost certain" in the March data. Markets widely expect the Federal Reserve to keep rates unchanged at next week's meeting, previously based on fading inflation trends. However, some investors now believe prolonged high rates may be needed if war-induced inflation persists. Policymakers must also balance lingering labor market fragility. The oil price spike from Middle East tensions is reshaping inflation expectations: while most analysts see sustained shocks as the real threat, short-term energy-driven inflation is set to hit March data. Citibank's March 9 report noted U.S. average retail gasoline prices had risen by ~17% since late February as of March 8.

Based on the daily chart, the Bollinger Bands are expanding upward, with moving averages diverging higher at the same time. Prices oscillate along the EMA12 and Bollinger Upper Band. After a golden cross, the MACD and signal lines returned above the 0-line, confirming a return to bullish territory. The pair is likely to retest recent highs and round levels (159.4 and 160). However, a doji star candlestick today would warrant caution for short-term pullbacks. RSI at 67 indicates dominant buying pressure. The 4H chart confirms that Bollinger Bands are also expanding upward, with moving averages diverging. Prices follow the EMA12 and upper band, but upside momentum is waning, signaling a possible correction. Near recent highs, selling pressure is likely. The MACD remains above the 0-line, keeping the overall trend bullish. RSI at 68 reflects optimistic sentiment. Therefore, it is recommended to buy at lows.

Trading direction: Buy

Entry Price: 158.1

Target Price: 162

Stop Loss: 155

Support: 154/152/149.5

Resistance: 160/161/162