Hawkish BOJ Rhetoric – OCBC

USD/JPY has started to ease lower in recent sessions, taking cues from a shift in BOJ rhetoric. The timing of the shift appears to coincide with Takaichi-Ueda meeting last week. USD/JPY was last seen at 156.30 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Room for corrective pullback

“Since then, BOJ rhetoric has tilted more hawkish. Masu said that the timing of rate hike was nearing while Koeda said that BOJ must keep raising real interest rates as prices have been ‘relatively strong’. Ueda told parliament on Fri that BOJ will debate the ‘feasibility and timing’ of rate hike in coming meetings.”

“We stand by our long-held view that wage growth, broadening services inflation and upbeat economic activities in Japan are some conditions already supportive of BOJ policy normalisation. But the BOJ has strangely maintained a long pause. We still look for BOJ to hike in Dec. Probability of Dec hike has shifted to above 50% from 16% a week ago.”

“Mild bullish momentum on daily chart is fading while RSI fell. Room for corrective pullback to play out in the interim. Support at 155.05 (21 DMA), 154.40 (76.4% fibo) and 151.60 (61.8% fibo retracement of 2025 high to low, 50 DMA). Resistance at 157.90 and 158.87 (previous high in 2025).”