Yen: Focus Shifts to BOJ Path – Scotiabank

USD/JPY is currently trading at 159.16, with the yen extending its mild weakening trend but remaining range-bound overall. Scotiabank strategists Shawn Osborne and Eric Theoret offered their latest assessment, noting that FX market attention is shifting from short-term price swings to expectations for the Bank of Japan's rate hike pace.

**Range-Bound Trading with Clear Support and Resistance**

According to Scotiabank strategists' analysis, USD/JPY previously found support around the 158.00 level, while facing resistance above 159. The current price has risen to near 159.16, sitting within that resistance zone. In the near term, whether the pair can effectively break through and hold above this level will depend on market interpretation of BOJ policy signals.

**Central Bank Path Becomes Key Variable**

Market reports indicate that as Japan's inflation data continues to exceed expectations, external bets on the BOJ resuming rate hikes have intensified, with market focus shifting to assessments of the timing for subsequent hikes. Scotiabank has previously noted that a strengthening of the BOJ's hawkish stance is a key driver behind periodic yen strength. The yen's current softness partly reflects market uncertainty over the pace of rate increases.

**Intervention Expectations and Structural Pressures Coexist**

Notably, structural factors are constraining the yen's depreciation pressure. According to reports, Japan's aging population and massive public debt burden have led markets to broadly believe the BOJ has limited room for aggressive rate hikes. Meanwhile, Japan's Finance Minister has previously stated that authorities are prepared to take "bold action" to curb excessive speculation, and has indicated that Japanese and U.S. positions on exchange rate policy are converging. If yen depreciation accelerates markedly, markets expect the likelihood of official intervention to rise, which to some extent provides implicit support for the yen.

Overall, USD/JPY movements in the near term will continue to be driven by BOJ policy expectations, with the range-bound pattern likely to persist, and a directional breakout dependent on clearer policy signals.