The Japanese Yen (JPY) ticks lower against its American counterpart during the Asian session on Friday after data showed that consumer inflation in Japan's national capital decelerated sharply in January. In fact, the Tokyo core Consumer Price Index (CPI) fell below the Bank of Japan's (BoJ) 2% target for the first time in nearly two years. This, in turn, validates policymakers' view that cost-push pressures will continue to ease in coming months and tempers expectations for an imminent shift in the central bank's policy stance. Adding to this, minutes of the December BoJ meeting revealed that board members agreed to patiently maintain the easy policy, which, along with the prevalent risk-on mood, undermines the JPY's relative safe-haven status.

Meanwhile, investors expect that another substantial round of pay hikes by Japanese firms could fuel consumer spending and demand-driven inflation. This could allow the BoJ to pivot away from its ultra-loose monetary policy settings and negative interest rates regime. Furthermore, geopolitics remains the biggest risk for the markets, which, along with the uncertain global economic outlook, helps limit losses for the JPY. Any meaningful appreciating move, however, seems elusive in the wake of the underlying bullish tone surrounding the US Dollar (USD), bolstered by reduced bets for an early interest rate cut by the Federal Reserve (Fed). This, in turn, warrants caution before placing aggressive directional bets around the USD/JPY pair.

Traders might also prefer to wait on the sidelines ahead of Friday's release of the US Personal Consumption Expenditures Price Index, due later during the early North American session. The crucial inflation data will play a key role in influencing the Fed's future policy decisions, which, in turn, will drive the USD demand in the near term and provide some meaningful impetus to the USD/JPY pair. Nevertheless, spot prices remain on track to post modest losses for the first week in the previous four as the focus now shifts to the highly-anticipated FOMC monetary policy meeting on January 30-31