USD/JPY Declines, but the Overall Outlook for the Yen Remains Hazy

USD/JPY is trading lower at 155.79 on Friday. Meanwhile, the yen remains under pressure at the end of the week. It is on track to record a second consecutive weekly decline amid ongoing uncertainty surrounding the Bank of Japan (BoJ) policy.

This week, the Japanese government nominated two academics known for favouring loose monetary policy to the BoJ board. Prime Minister Sanae Takaichi, following a meeting with BoJ Governor Kazuo Ueda, expressed concerns about the possibility of further interest rate hikes.

In contrast, board member Hajime Takata, who holds a more hawkish stance, has called for additional policy tightening. He also indicated that the bank's price stability target is nearly achieved.

Governor Ueda himself noted that the BoJ will carefully assess incoming economic data at its March and April meetings, leaving the door open to a potential short-term rate hike.

Economic statistics are also influencing market expectations. Inflation in Tokyo has slowed to its lowest level in over a year, partly due to government subsidies for utilities. This has reinforced expectations that the central bank may refrain from tightening policy in the near term.

Technical Analysis

On the H4 chart, USD/JPY is forming a consolidation range around the 156.15 level. A decline towards 155.50 is expected today, after which a corrective move back towards 156.15 may follow. A breakout above this range could open the way to further gains towards 157.50. Conversely, a break below the range would signal a continuation of the downward move, initially towards 154.18, with scope to extend towards 151.82. Technically, this bearish scenario is supported by the MACD indicator, whose signal line remains above zero but is pointing firmly lower.

On the H1 chart, the pair has broken below the 156.15 level and is forming a downward wave towards 155.40. A subsequent correction back to 156.15 cannot be ruled out. This short-term bearish bias is confirmed by the Stochastic oscillator, with its signal line below 50 and pointing lower.

Conclusion

USD/JPY is declining amid persistent uncertainty regarding the Bank of Japan's next policy move. Market expectations are being pulled between hawkish signals from some board members and more cautious communication from the leadership, reinforced by softer Tokyo inflation data. Technical analysis suggests scope for further short-term downside, although a corrective bounce remains possible.

By RoboForex Analytical Department

Disclaimer:Any forecasts contained herein are based on the author's particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.