Japanese yen recovers after hawkish Bank of Japan minutes

The Japanese yen has rebounded on Tuesday after sliding almost 1% a day earlier. In the European session, USD/JPY is trading at 150.11, down 0.39% on the day. The yen weakened to 150.95 in the Asian session, its lowest level since March 3.

The Bank of Japan raised rates at the January meeting, for only the third time since the central bank started its tightening cycle in March 2024. The Bank raised rated by a quarter point to 0.5%, its highest level since the 2008 global finacial crisis.

At the meeting, the BoJ revised upwards its inflation forecast as members have become more confident that rising wages will keep inflation sustainable close to the Bank's 2% target. The minutes noted that most members agreed that the likelihood of reaching the 2% target was rising.

The minutes reiterated that the BoJ plans to continue to tighten policy, provided that growth and inflation outlooks match the Bank's forecasts.

The BoJ has telegraphed that it plans to continue rates but has left investors guessing about a timeline. The most likely dates for the next rate hike are June or July. The BoJ held rates last week, warning of uncertainty in the global outlook, particularly the impact of the new US administration's trade policy. The BoJ is keeping a close eye on the upside risk of inflation, due to the potential of a global trade war as well as rising wages.

Japan released BoJ core inflation, a key inflation indicator, earlier today. The February report came in at 2.2% y/y, unchanged from January and matching the forecast. BoJ core inflation remains at its highest level since March 2024.

USD/JPY is testing support at 150.27. Below, there is support at 149.78

There is resistance at 151.19 and 151.68