USD/JPY traded around 159.90 during Thursday’s Asian session, lingering just below the critical psychological barrier at 160. Japanese authorities have spent roughly $74 billion on currency intervention near this level since late April, yet intervention has yielded limited results.

Hike Expectations Build

The Bank of Japan’s policy meeting falls on June 15–16. Sources familiar with discussions say policymakers plan to debate a 25-bp rate increase to 1%, with room for additional tightening later this year. Overnight index swaps price in an 88% probability of a June rate rise.

BOJ Governor Kazuo Ueda sent an unambiguous signal in his final pre-meeting public speech: “If Middle East tensions drive inflation higher more than they hurt economic growth, the BOJ must consider lifting rates.” Local news outlets Kyodo and Nikkei interpreted the remark as a strong hint for a June hike.

Technical Setup: Near-Term Momentum Fades

On daily charts, USD/JPY stays within a long-term uptrend; both the 50-day and 200-day moving averages slope upward, keeping the longer-run bull trend intact. Still, short-term momentum is softening. The 20-period MA has flashed sell signals versus bullish longer-dated MAs, pointing to corrective downside while the medium-term structure remains unbroken. Key supports sit at 159.79 and 159.75, with a breakdown opening a test of the 50-day MA near 158.6. Resistance caps near 160, with a breakout targeting 160.4.

BOJ Caught in Policy Dilemma

The central bank faces conflicting forces: climbing crude prices from Middle East geopolitics boost inflation and strengthen the case for higher rates, while vague hawkish rhetoric risks fresh yen sell-offs with USD/JPY hovering close to 160.

“Failure from the BOJ to deliver clearer signals of faster tightening will trigger sharp yen volatility,” said Moh Siong Sim, FX strategist at OCBC Bank Singapore.