USD/JPY falls below 148.00 despite persistent uncertainty over BoJ’s policy outlook

• USD/JPY retreats after gaining over 2% in the previous session.

• The BoJ’s latest policy summary underscores lingering uncertainty, suggesting a divergence of views among policymakers over the policy outlook.

• BoJ Deputy Governor Shinichi Uchida noted that US tariffs pose both upside and downside risks to Japan’s inflation outlook.

USD/JPY pulls back after registering more than 2% gains in the previous session, trading around 147.90 during the Asian hours on Tuesday. The pair depreciates as the Japanese Yen (JPY) gains ground despite a persistent uncertainty over the Bank of Japan’s (BoJ) interest rate outlook.

BoJ Deputy Governor Shinichi Uchida acknowledged both upside and downside risks stemming from potential US tariffs, noting that such measures could weigh on Japan’s economy. He added that Japan's economic growth is expected to slow toward its potential rate before gradually recovering, assuming a rebound in overseas economies.

Deputy Governor Uchida also pointed to rising wages driven by a tight labor market, suggesting firms are likely to continue passing on higher labor costs, which may support underlying inflation and inflation expectations over time.

Japanese Finance Minister Katsunobu Kato commented Tuesday on the possibility of meeting with US Treasury Secretary Scott Bessent to discuss foreign exchange matters and potentially the ongoing tariff negotiations. He reiterated that Japan will closely watch the US-China tariff discussions, though he refrained from commenting on currency levels.

The Bank of Japan’s (BoJ) Summary of Opinions from its April 30–May 1 monetary policy meeting highlighted persistent uncertainty as a key concern. One member indicated that the central bank is likely to continue raising interest rates in line with economic and inflation improvements. Another emphasized the need to maintain the current rate-hike stance, noting that real interest rates remain deeply negative, while calling for careful risk assessment. A separate member expressed concern over the US’s trade policy, warning that increased tariffs could significantly impact Japan’s economic outlook and inflation trajectory.

The US and China agreed over the weekend to pause the imposition of steep triple-digit tariffs as part of preliminary trade talks. This temporary truce provides markets with short-term relief ahead of the US’s planned "reciprocal" tariff schedule set to resume in 90 days.

Looking ahead, traders are focused on the upcoming US Consumer Price Index (CPI) report for April, due later Tuesday. Headline inflation is expected to rebound to 0.3% month-over-month from -0.1% previously, while core CPI is also forecast to rise to 0.3% from 0.1%. Year-over-year figures for both measures are projected to remain steady.