[USD/JPY is waiting on the BOJ but not letting its guard down; what the market is watching now is not merely the decision to hold, but the act of holding itself.]

【USD/JPY: Even if we are waiting for the Bank of Japan, do not let your guard down; what the market is watching now is not simply the hold itself】

In the current currency market, USD/JPY continues to hover around high levels, but the market focus has shifted from a simple yen weakness and dollar strength tothe results of the Bank of Japan meeting on April 27–28 and the message following it. The BoJ’s publicly released schedule also indicates that a monetary policy meeting is planned for the 27–28, and the market views this event as the biggest factor this week.

At present, the BoJ is highly likely tokeep the policy rate at 0.75%, Reuters reports. The backdrop includes energy price increases due to prolonged Middle East tensions and uncertainty about the Japanese economy. Nevertheless, keeping rates unchanged this time does not mean the rate-hiking path will disappear. In the market, expectations for additional hikes after June remain strong, even with a delay in April, and Reuters’ survey indicates many expect rate hikes by June.

On the other hand, Japan’s price indicators remain somewhat ambiguous. March core CPI in Japanfell below the BoJ’s 2% target for the second consecutive month. However, this is partly due to government fuel subsidies and stabilization in food prices, and if companies pass through higher fuel costs arising from Middle East tensions in the future, inflation could rise again. Additionally, household inflation expectations remain elevated, making it a difficult situation for the BoJ as it must balance “economic concerns” with “upward price pressures.”

Warnings about the currency itself continue. On the 24th, the Japanese government reiterated that it is prepared to take “decisive action” if yen depreciation accelerates, and said it will coordinate closely with the United States. The 160-yen level has historically been a threshold for anticipated intervention, and for market participants it embodies both potential upside room and the risk of a sharp reversal. The vicinity of around 160 yen is a level where intervention concerns have often intensified in the past, and for market participants it signals both upside potential and the risk of a sharp drop.

Furthermore, the USD/JPY today is also influenced by Middle East tensions. As of the 27th Reuters reports, due to stalled talks between the U.S. and Iran, Brent crude has risen to aroundabout $108 per barrel, and the dollar market remains susceptible to geopolitical risks. Given Japan’s high dependence on energy imports, higher crude prices combined with yen weakness tend to put more pressure on domestic prices, thereby complicating BoJ policy decisions.

The U.S. side is not inclined to move toward a clear-cut easing stance either. In its March 18 statement and subsequent minutes, the Fed noted thatinflation remains elevated and the economic outlook is uncertain. In other words, it is unlikely that the U.S. will promptly turn markedly dovish, and the U.S.-Japan interest rate differential continues to support USD/JPY.

In such a context, what individual investors should pay attention to isnot just whether the BoJ stays on hold, but how much room for hawkish policy remains after the hold. The current USD/JPY is not a market where buying because prices are high feels safe. With policy, geopolitics, oil, and authorities’ warnings all overlapping, it is now most important to focus on time periods with higher price movement, such as London and early New York sessions, and to gauge how long the news will keep driving material moves.