USD/JPY: Policy normalisation plans still alive – OCBC

USD/JPY traded lower intra-day after BoJ Governor Ueda called for vigilance over food inflation risks. Japan's core inflation hit 3.5% in April, accelerating at its fastest annual pace in more than two years due largely to a 7% surge in food costs. Pair was last at 143.83 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Risks remain skewed to the downside

"Hotter than expected data keeps BoJ hike hopes alive and remains in line with our view that wage growth, broadening services inflation and upbeat economic activities in Japan should continue to support BoJ policy normalisation although tariff uncertainty may temporarily delay policy normalisation in the near term."

"While the timing of BoJ policy normalisation may be deferred, policy normalisation is not derailed. Fed-BoJ policy divergence and USD diversification theme should still support USDJPY's broader direction of movement to the downside."

"Daily momentum is mild bearish while RSI fell. Risks remain skewed to the downside. Next support at 142, 141.60 before 139.90 (recent low in Apr). Resistance at 144.40/60 levels (21 DMA, 23.6% fibo retracement of 2025 high to low) and 145.70 (50 DMA)."