USD/JPY stable while operators await the decision of interest rates

• The USD/JPY remains about 144.20 while the operators expect the Bank of Japan Bank verdict on Tuesday.
• The divergence of Federal Reserve of the US Federal Reserve supports the fortress of the US dollar against Yen.
• Any hard line surprise of the BOJ could limit the USD/JPY rise and support YEN’s demand.

The Japanese Yen (JPY) remains stable against the US dollar (USD) on Monday while the operators remain out before the Bank of Japan’s policy (BOJ), scheduled for Tuesday. The USD/JPY torque is struggling to advance more after Friday’s profits, which were backed by the increase in tensions between Israel and Iran, and remains confined within a narrow range.

At the time of writing, the pair remains about 144.20, near its 21 -day exponential (EMA) mobile average in 144.19. Intradía movements have been limited so far, with the maximum of the day marked in 144.75. The minimum in 143.65 reflects a cautious mood in the market in the prelude to the result of the BOJ.

The markets generally expect that the Bank of Japan maintains its reference rate without changes in 0.50% on Tuesday, reflecting its last policy decision of May 1, when it kept the stable rates and degraded its growth perspective in the midst of persistent global risks. Governor Kazuo Ueda has pointed out that the Central Bank wants clear evidence of sustained salary growth and stable inflation before committing to another rate of rates. Meanwhile, there is a growing speculation that the BOJ could announce a slower rhythm of bond purchases as part of its gradual path towards the normalization of politics.

Under the current plan, the BOJ has been reducing its monthly purchase of Japanese government bonds in approximately ¥ 400 billion each quarter, with this program programmed to continue until March 2026 and continue for about a year later. The Central Bank is expected to discuss possible adjustments beyond April 2026 at this week’s meeting. While some policy responsible are open to half reduced the reduction rate to ¥ 200 billion per month, others prefer to maintain the current pace, citing stable market conditions since the reduction began in August of 2024.

This cautious approach highlights the growing policy gap with the US Federal Reserve (FED), which is expected to keep the stable rates this week but is not in a hurry to cut the indebtedness costs despite inflation cooling signals.

Beyond the immediate decision on rates, the operators will closely monitor the comments after the Governor Ueda’s meeting and the updated economic projections in search of signals on the time of any additional monetary tightening. Clear stable salary earnings or persistent pricing pressure could increase the expectations of another rate rise later this year, offering a new support for the YEN. On the other hand, a moderate tone and weak growth projections could reinforce the divergence of policies with the Fed, keeping the USD/JPY elevated near the current short -term maximums.