ForexLive Asia-Pacific FX news wrap: Tokyo inflation eases but remains well above target

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• PBOC sets USD/ CNY reference rate for today at 7.1627 (vs. estimate at 7.1771)
• South Korea government holds emergency meeting on household debt
• European Central Bank’s Piero Cipollone will speak on Friday
• Japan May retail sales +2.2% y/y (expected +2.7%)
• Goldman Sachs on oil, sees Brent $90 if interruption of trade through the Strait of Hormuz
• Japan May unemployment rate 2.5% (expected 2.5%)
• Tokyo June 2025 headline CPI +3.1% y/y (3.3% expected)
• Kashkari says inflation is above 2%, have to get it back to 2%
• JP Morgan expects more USD weakness could encourage greater diversification into EM assets
• Macron: If US 10% tariff stays, Europe will respond by imposing an equivalent on US firms
• White House official dials it all back – its not a deal, its just an ‘understanding’
• US Com Secretary Lutnick announced the deal with China that was reached in Geneva in May!
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• Trump says just signed deal with China on Wednesday
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Trump and Commerce Secretary Lutnick announced that a deal had been reached with China, though details were slow to emerge. The agreement amounts to an understanding to implement an additional framework for the previously stalled Geneva agreement. As part of the agreement, China will speed up licensing for rare earth mineral exports, while the U.S. agreed to roll back certain export controls — including on ethane shipments to China, as noted in yesterday’s wrap.

Minneapolis Fed President Neel Kashkari also spoke, highlighting the need for caution amid tariff uncertainty:

• Inflation is still above the Fed’s 2% target and must come down.

• The labour market remains strong, which the Fed wants to preserve.

• Policymakers should move slowly until they better understand the inflationary impact of tariffs.

• Some effects of tariff-related inflation are delayed, but they will emerge.

From Japan, the focus was on Tokyo CPI for June — often a lead indicator for nationwide inflation. Core inflation slowed for the first time in four months but remained elevated at 3.1% y/y, well above the Bank of Japan’s 2% target. Energy inflation eased, but food prices continued to rise, with rice up around 90%, prompting government intervention.

Other Japanese data:

In China, industrial profits fell sharply, down by 9.1% y/y in May — the steepest drop since October — dragging the year-to-date figure from +1.4% (Jan–Apr) to -1.1% (Jan–May). The decline underscores persistent pressure on industrial firms from deflation, weak demand, and elevated U.S. tariffs, as Beijing’s stimulus measures struggle to restore corporate profitability.

In FX, USD/JPY was little changed on net after briefly rising above 144.80 on the earlier data before retracing. Elsewhere, major currencies traded in subdued ranges. The Taiwan dollar hit its strongest level against the U.S. dollar in over three years.

Gold traded lower again, slipping back toward US$3,300.