[MARKET ANALYSIS] NOK underperforms after cooler than expected CPI, JPY boosted by Katayama to the detriment of USD

G10s are mixed against the Buck. JPY leads after FinMin Katayama touted measures to promote domestic inflows, Kiwi continues to eek gains post-RBNZ as markets look to price a cumulative 50bps tightening by year end and NOK is the worst performer after broadly cool inflation data.
USD a touch weaker as JPY firms alongside the tempered recent Gulf updates. Geopolitical newsflow quietened overnight, with energy benchmarks off best levels with Brent around USD 75/bbl, about 5 Bucks off the week’s highs. DXY slipped throughout APAC as the JPY firmed, but found buyers below 21DMA at 100.85 which has proven support in recent sessions.
JPY digests updates from FinMin Katayama who said she was to pursue steps to promote investment in Japanese assets by GPIF and others. This, on the face of it, would be a textbook tactic to encourage domestic investment and passively limit outflows, especially with a large composition (50%) of pension funds allocated to foreign investments. Several strategists note this is a positive sign in attempts to shore up the currency; though CapEco said “Much of its domestic bond portfolio is invested passively, and shifting more assets into domestic bonds would come at a sizeable fiscal cost if it requires selling equities”, and others highlight Katayama is not in a position to direct changes, it would be under the jurisdiction of the Labour Ministry. USD/JPY gradually trundled lower from a 162.50 peak, to mark a trough below 161.30 (session low 161.28), with a modest kneejerk lower on not-too-surprising BoJ sources. ING notes the JPY-funded carry keeps risks to the upside for the pair.
NOK is the clear underperformer vs. both the USD and SEK after the soft inflation data series. Most metrics cooled beneath expectations, core Y/Y the sole figure rising above consensus, albeit unch. from May. CPI-ATE, the Norges Bank’s preferred gauge of inflation fell was 2.9%, well below the Bank’s estimate of 3.3%, will likely provide conviction for doves with the bank likely to remain on hold in the August meeting; then tighten in September should the next (August) CPI metrics not provide a dovish surprise. NOK/SEK fell from a 0.9940 peak to mark a trough at 0.9882. 8th July low at 0.9861 is the next level below.