The Bank of Japan (BoJ) held its short-term interest rate at 0.5% at the latest policy meeting. Governor Kazuo Ueda said uncertainties from global tariffs justify a flexible approach. The BoJ cut its growth forecasts and pushed back the timing of reaching its 2% inflation goal to late 2026. After the announcement, the yen weakened, and USD/JPY rose as markets saw rate hikes being delayed. In the weeks that followed, strong inflation data – including a 3.5% rise in Japan’s CPI excluding fresh food – fueled talk of earlier BoJ tightening. These developments together have set the tone for USD/JPY traders.
BoJ’s Latest Policy Statement and Outlook
At the April 30-May 1 meeting, the BoJ decided by unanimous vote to keep the uncollateralized overnight call rate at about 0.5%. The statement noted that underlying inflation is projected to reach 2% only around the latter half of fiscal 2026, about one year later than previously forecast.
In other words, price pressures remain elevated but are expected to slow. The central bank trimmed its growth forecast for the current fiscal year sharply, reflecting downside risks from U.S. trade tensions. Governor Ueda emphasized that wages and inflation would likely slow in the near term, and said the bank would take a “flexible” approach until a sustained rise in wages supports prices.
Japan’s core inflation is running above the 2% target. For example, the national CPI excluding fresh food hit 3.5% year-on-year in April. This surprise inflation adds to pressure on the BoJ. At the same time, bond markets reacted strongly: yields on very long-dated Japanese government bonds (30- and 40-year maturities) jumped to record highs this week. Those rising yields reflect concerns about loose fiscal policy and above-target inflation.
In summary, the BoJ held policy steady, but its statement showed caution. Markets now expect any rate hikes to be delayed until data gives clearer signs of sustained inflation above 2%.
Market Reaction: USD/JPY Volatile After BoJ Decision
The BoJ announcement immediately affected currency markets. On the day of the decision, the yen fell, and USD/JPY climbed as traders repriced the timing of BoJ tightening. For example, Japanese yields and the yen dropped on growing views that rate hikes would come later than expected. This meant the dollar gained against the yen. In practical terms, USD/JPY moved higher, testing the upper end of its recent range (around 144 yen per dollar).
A few weeks later, Japan’s strong April inflation data again moved the market. The yen strengthened on May 23 after core inflation surprised on the upside. Underlying CPI accelerated to 3.5%, and core CPI (ex-food and energy) rose to 3.0%. These hotter readings led traders to price in higher chances of a BoJ rate hike in the summer. During the Asian session, USD/JPY dipped from about 143.90 to a low of 143.81 before settling near 143.85.
In short, unexpected inflation cooled recent dollar strength and sent USD/JPY lower. The pair is now trading with a bearish tilt, reflecting mixed signals from policy moves and data releases.
USD/JPY: Support/Resistance Levels and Technical Analysis
Chart patterns and indicators suggest the downtrend in USD/JPY is still intact. The pair is trading below its key moving averages, which is a bearish sign. Specifically, USD/JPY remains under the 20-day and 50-day moving average lines. This indicates that sellers have control in the medium term. On shorter timeframes, the RSI (Relative Strength Index) on a 4-hour chart is around 64, getting close to overbought territory. That suggests the recent bounce in USD/JPY may be pausing.
Key technical levels to watch are as follows. On the upside, initial resistance is near the April trading range top. A rise above about 145.50 could face selling pressure. Clearing 145.50 would shift the bias back to bullish, with the next resistance near 147.30–147.80. Conversely, support lies near the 142.30 area. If USD/JPY breaks below 142.30, it may drop toward the mid-April lows around 140.30/140.00. A decisive break below 140.00 would open the door to further declines toward 138.90. In summary, bears have the upper hand, but a clear move beyond 145.00 could reverse the near-term outlook.
These technical patterns align with the fundamental picture: USD/JPY is at a crossroads. The downtrend is supported by lower highs and a fading rally, but any change in BoJ or Fed policy could trigger bigger moves. Traders will monitor RSI levels and key Fibonacci and moving-average milestones as potential signals of a reversal. For now, the chart suggests caution on long-dollar positions and a look at 142.30 and 145.50 as the next significant barriers.
Conclusion
Japan’s surprise inflation data and the BoJ’s cautious policy stance have strengthened the yen and put downward pressure on USD/JPY. This reflects market views that the BoJ’s rate hike path may be delayed. Key technical indicators support a bearish bias, but traders will watch for any breakout above resistance levels. Stay updated with H2T Finance for the latest insights in our Breaking News section. We deliver timely, neutral, and data-driven analysis to help you navigate the Forex market more effectively.
About H2T Finance
H2T Finance’s Breaking News delivers real-time financial news, keeping you up to date with market movements, policies, and global economic events. As part of H2T Media Group, we are committed to providing accurate information and in-depth analysis, helping investors make quick, confident decisions in an ever-changing financial landscape.
For inquiries or personalized assistance, feel free to contact us:
📞 Phone: +84933.948.888
📧 Email: info@h2tmediagroup.com
💻 Website: https://h2tfinance.com/
📍 Address: 4/567 Tổ 10 Khu Phố Hòa Lân 1, Thuận An, Bình Dương, Vietnam
At H2T Finance, your success is our priority.
