JPY – Yen Remains Soft; Markets Alert to Intervention Risk

The Bank of Japan concluded its two-day policy meeting on Friday and raised the short-term policy rate by 25 bp from 1.00% to 1.25%, in line with expectations. The decision passed 7–2, with board members Asada and Sato dissenting. The statement noted that underlying inflation is gradually approaching the 2% target and that financial conditions remain accommodative. The BOJ reiterated that it will continue to raise rates in line with economic, price, and financial developments, assessing the probability of the baseline scenario and associated risks when deciding the timing and pace of further hikes. Core CPI is projected to accelerate to well above 2% in the second half of fiscal 2026 before easing back toward 2% later in the forecast horizon. Middle East developments, AI-related demand, and the exchange rate were flagged as two-way risks. Even after the hike, financial conditions are expected to stay accommodative; the path remains one of gradual rather than aggressive tightening.

Japan enters a three-day holiday period, reducing market liquidity and potentially amplifying yen volatility—particularly if authorities intervene, in which case the impact would be magnified.

Technically, USD/JPY has re-stabilized above the 155 handle, supporting further rebound potential. Larger resistance is seen at the 250-day moving average 157.50, followed by the 50-day average near 159 and the 160 level, with an extension target at 160.80. Support is located at 156.30, 154.20, and 153.20, with a deeper probe possible toward the 27 January low of 152.09.

Forecast range:
Resistance: 157.50 – 159.00 – 160.00 – 160.80  
Support: 156.30 – 154.20 – 153.20 – 152.09

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