Japanese Yen remains on the back foot after BoJ decision; focus shifts to post-meeting presser

• The Japanese Yen remains on the back foot after the BoJ decided to leave interest rates unchanged.
• A modest USD uptick further acts as a tailwind for the USD/JPY pair through the Asian session.
• Traders now look forward to BoJ Governor Kazuo Ueda’s remarks for some meaningful impetus.

The Japanese Yen (JPY) sticks to the intraday negative bias and moves little in reaction to the Bank of Japan (BoJ) policy decision to keep the short-term interest rate target at 0.50%. Traders, however, seem reluctant to place aggressive directional bets and opt to wait for more cues about the BoJ’s policy outlook. Hence, the focus will remain glued to the post-meeting presser, where comments from BoJ Governor Kazuo Ueda should influence the JPY.

In the meantime, expectations that the BoJ could postpone the rate hike to Q1 next year due to uncertainty over US tariff policy could undermine the JPY. Furthermore, news that the US and Japan failed to reach a trade deal at the G-7 summit keeps the JPY bulls on the defensive. This, along with a modest US Dollar (USD) strength, acts as a tailwind for the USD/JPY pair through the Asian session on Tuesday, though the uptick lacks bullish conviction.

Japanese Yen bulls largely shrug off BoJ decision to leave rates unchanged

• The Bank of Japan, as was widely anticipated, decided to leave policy rate unchanged at the end of the June policy meeting this Tuesday. BoJ will reduce its monthly outright JGB purchases to about ¥2 trillion in January-March 2027. The amount will be cut down by ~¥400 billion each calendar quarter until January-March 2026 and then by ~¥200 billion each calendar quarter from April-June 2026
• The Japanese Yen moves little after the announcement amid expectations that the Bank of Japan might forego another rate hike this year amid trade uncertainties. Japan’s Prime Minister Shigeru Ishiba and US President Donald Trump failed to achieve a breakthrough on tariffs at the Group of Seven summit.
• Ishiba wants Trump to eliminate 25% duties on Japanese vehicles and 24% reciprocal levies on other Japanese imports, which have been suspended until July 9.“There are still some points on which the two sides are not on the same page, so we have not yet reached an agreement on the trade package,” Ishiba told reporters.
• Meanwhile, Japan’s Finance Minister Katsunobu Kato said that there is no fixed plan right now to hold further talks with US Treasury Secretary Scott Bessent. Kato further added that higher oil prices and a lower JPY are not a favorable combination for the Japanese economy as the country is a very large importer of energy.
• The Bank of Japan will announce its policy decision later today and is widely expected to maintain short-term interest rates at 0.5%. Furthermore, BoJ Governor Kazuo Ueda is likely to signal readiness to continue interest rate hikes as the escalating Iran-Israel conflict could boost crude oil prices and disturb the price outlook.
• The market focus will also be on the board’s review of an existing bond-tapering plan running through the end of the current fiscal year, and a new program that will extend through fiscal 2026. The BoJ will consider slowing reductions in its bond purchases next year under a quantitative tightening (QT) plan.
• On the geopolitical front, the deadly conflict between Israel and Iran has entered its fifth day, with both sides widening their attacks. Trump, in a Truth Social post, warned Iranians to “immediately evacuate Tehran”. A White House official said that the post reflected the urgency of the need for Iran to come to the table for talks.
• Investors this week will further evaluate the Federal Reserve’s latest monetary policy update for more cues about the future rate-cut path. This, in turn, will help in determining the next leg of a directional move for the US Dollar and the USD/JPY pair.

USD/JPY awaits breakout through short-term range before the next leg of a directional move

From a technical perspective, sustained strength and acceptance above the 145.00 psychological mark will confirm a bullish breakout through a multi-week-old trading range. Given that oscillators on the daily chart have just started gaining positive traction, the USD/JPY pair might then surpass the monthly swing high, around the 145.45 region, and aim to conquer the 146.00 round figure. The momentum could extend further towards the 146.25-146.30 region, or the May 29 peak. 

On the flip side, any corrective slide now seems to find some support near the 144.50-144.45 region ahead of the 144.00 mark. A convincing break below the latter could drag the USD/JPY pair to the 143.55-143.50 intermediate support en route to the 143.00 round figure and last Friday’s swing low, around the 142.80-142.75 region. This is followed by the lower boundary of the trading range, around mid-142.00s, which if broken would set the stage for the resumption of the downtrend from the May monthly swing high.