For a brief period this morning, market commentators mused that the BoJ could announce the next rate hike of the cycle as soon as October. That conclusion was drawn from what appeared to be a slightly more hawkish then expected outcome to today’s BoJ policy meeting. This speculation was quickly quashed by comments from BoJ Governor Ueda in his press conference suggesting that he does not see the BoJ as being 'behind the curve' on policy tightening. Nor does he see the 'fog suddenly lifting' over the outlook for trade, Rabobank's FX analyst Jane Foley reports.

USD/JPY nears 150.00 as BoJ signals caution on rate hikes

"The BoJ’s updated ‘Outlook for Economic Activity and Prices’ highlights the uncertainties facing policy makers. While the BoJ’s estimate for CPI inflation has been revised higher, the statement also warns that 'Japan's economic growth is likely to moderate, as trade and other policies in each jurisdiction lead to a slowdown in overseas economies and to a decline in domestic corporate profits and other factors'.  Having initially dipped lower in Asian hours this morning, USD/JPY has pushed higher and is currently breathing down the neck of USD/JPY150.00."

"USD/JPY has not held above the 150.00 level since April. Trump’s reciprocal tariff announcement at the start of that month led to an unleashing of USD negative sentiment, that may now have run its course. While the USD remains the weakest performing G10 currency in the year to date, it is the best performer relative to its peers in July. This suggests that rotation out of US assets that characterised market activity in the first five months of this year has turned. I"

"In light of this week’s short-covering support for the USD, we have edged our 1 month forecast for USD/JPY higher to 148.00.  On the assumption that the market maintains the view that the BoJ is likely to hike rates around the turn of the year we expect USD/JPY to push back to 145.00 on a 3-month view."