USD/JPY rises as BoJ holds rates despite higher inflation outlook

USD/JPY advanced 0.6% to 153.20 after the Bank of Japan kept interest rates unchanged at 0.25%, despite raising its inflation projections for fiscal years 2025 and 2026. The central bank's updated forecasts show core CPI reaching 2.1% in FY2025 and 2.0% in FY2026, above its 2% target. However, the BoJ's cautious approach to policy normalization and emphasis on data dependence disappointed markets expecting a more aggressive tightening timeline. Governor Ueda hinted at potential future rate hikes but stressed the need to assess wage growth and consumption trends. The yen's weakness was broad-based, with EUR/JPY and GBP/JPY also posting gains. Technical analysis shows USD/JPY facing resistance at 153.80, while support has formed at 152.50. The policy divergence between the Fed's higher-for-longer stance and BoJ's gradual approach continues to underpin the pair's bullish bias.