The Japanese yen traded in a narrow range on Tuesday, with the USD/JPY pair holding steady as investors remained cautious ahead of the Bank of Japan’s (BoJ) upcoming policy announcement. Market participants are closely watching for signals from Governor Kazuo Ueda that could shape expectations for future monetary tightening.
Despite a lack of major moves, the yen has shown resilience in recent sessions, buoyed by speculation that the BoJ may start gradually dialing back its ultra-loose policy stance. While no change is expected at this meeting, traders are focused on Ueda’s comments regarding inflation dynamics and wage growth, which could offer hints about the policy path ahead.
The dollar’s recent consolidation, following a retreat from multi-month highs, also helped stabilize the yen. Soft US data and dovish rhetoric from Federal Reserve officials have eased pressure on the greenback, giving room for the yen to recover from earlier declines.
Still, any significant upside for the yen may depend on clearer evidence that the BoJ is preparing to exit negative interest rates or adjust its yield curve control settings. Until then, volatility may remain muted, particularly with global risk sentiment providing little directional clarity.
As the BoJ meeting looms, markets remain positioned cautiously long on the yen, with bullish bias intact amid growing expectations of a slow but steady policy shift. Investors will be parsing every word from Ueda for confirmation of that narrative.
