BOJ policy uncertainty pushes USDJPY toward monthly peak

The USDJPY pair is making another attempt this week to break above the 145 resistance level. This threshold has capped all upward price movements over the past month, but by Wednesday's trading close, dollar bulls finally managed to sustain gains above this critical mark. The breakout now opens a path toward 146.5, with May's peak of 148.5 becoming increasingly plausible as recent developments boost the probability of this scenario.

The yen's weakening demand was fueled by Tuesday's central bank decisions. The Bank of Japan (BOJ) maintained its rate at 0.5% but opted to slow its balance sheet reduction pace, which is a clear signal of policymakers' reluctance to tighten monetary policy amid US tariff uncertainty and escalating Middle East tensions.

The current analyst consensus forecast from Reuters’ survey now rules out another BOJ rate hike until at least early 2026. That is why the vast pool of Japanese corporate capital invested in foreign assets will likely remain overseas. Deutsche Bank analysts estimate this capital exceeds $2 trillion, deployed across US and EU financial markets. Japanese securities’ yields remain insufficient to attract significant private investor interest.

Meanwhile, the Fed continues to maintain borrowing costs in the 4.25–4.5% range. While yesterday’s speech by Jerome Powell reaffirmed plans for two rate cuts by year-end, Bloomberg analysts view this scenario as overly optimistic. They argue that even if the Strait of Hormuz remains open, the Israel-Iran conflict will fuel inflationary pressures. This is reflected both in the sharp rise in oil prices and the surge in corn, wheat, and soybean — crops dependent on Middle East-produced fertilizers.

The RSI indicator on the USDJPY daily chart is rising gradually, avoiding overbought conditions. From a technical standpoint, the pair faces no obstacles to advancing toward the 146.5 level.

Consider the following trading strategy:

Buy USDJPY near the level of 145. Take profit – 146.5. Stop loss – 143.5.