The Japanese Yen spiked around 30 pips against the US dollar on the release of Inflation data. For the new members, the Consumer prices account for a majority of overall inflation. Inflation is important to currency valuation because rising prices lead the central bank to raise interest rates out of respect for their inflation containment mandate. But the existing data represents Core CPI and shows a change in the price of goods and services purchased by consumers, excluding food and energy.

Food and energy prices account for about a quarter of the CPI, but they tend to be very volatile and distort the underlying trend. The BOJ usually pays more attention to the Core data – and so do traders. As per the report released by the Bank of Japan, the consumer price index increased by 0.5%, exactly in line with the economists’ forecast. USD/JPY has given up the earlier gains after the news as the pair has managed to bounce off 111.650 level to trade at 111.850.