• USD/JPY slips toward 156.00 as the Yen firms on intervention chatter and a weaker US Dollar.
• Soft US PPI and disappointing Retail Sales data reinforce signs of cooling demand and easing inflation momentum.
• Yen recovery remains shallow amid stimulus concerns and limited BoJ tightening conviction.

The Japanese Yen(JPY) trades on the front foot against the US Dollar (USD) on Tuesday, with USD/JPY pressured by intervention chatter in Tokyo and a weaker Greenback following soft US economic data. At the time of writing, the pair is trading around 156.05, down nearly 0.50%, retreating from recent multi-month highs.

The US Dollar came under heavy selling pressure after delayed Producer Price Index (PPI) and Retail Sales figures for September pointed to softer inflation momentum and weakening consumer demand.

Headline PPI rose 0.3% MoM, in line with expectations, while the annual rate held at 2.7%, but the core measure increased only 0.2% MoM, undershooting the 0.3% forecast and easing to 2.6% YoY from 2.9%.

Retail Sales also disappointed. Headline Retail Sales rose 0.2% MoM, missing the 0.4% forecast and slowing from 0.6% in August. On an annual basis, Retail Sales rose 4.3% YoY in September, easing from around 5.0% in August.

Retail Sales Control Group, which feeds directly into GDP calculations, contracted 0.1% in September, missing expectations for a 0.3% increase and easing from 0.6% in August. Retail Sales ex-Autos came in at 0.3% MoM, undershooting the 0.4% forecast and slowing from 0.6% in August.

Labour market signals also pointed to further softening, with the ADP Employment Change 4-week average falling to -13.5K from -2.5K. The decline reflects easing job creation momentum and adds to signs of a weakening labour market.

Markets were already ramping up interest rate cut bets following dovish remarks from influential Federal Reserve (Fed) officials who signalled openness to easing, and the latest data has strengthened confidence that policymakers may, in fact, cut rates in December.

In Japan, repeated verbal intervention warnings from Finance Minister Katayama and other officials helped the Yen regain ground, as authorities reiterated discomfort with rapid currency moves and signalled readiness to act if needed.

However, fiscal concerns tied to the government’s large stimulus package, along with doubts that the Bank of Japan (BoJ) will hike rates in the near term, continue to undermine the Yen’s broader outlook and limit the scope for sustained appreciation.