USD/JPY dips as BoJ holds rates, raises inflation outlook to 2.4%

USD/JPY has declined 0.5% to 155.20 following the Bank of Japan's decision to maintain interest rates at 0.75%, while significantly revising its core inflation forecast higher. The BoJ upgraded its FY2026 core CPI projection to 2.4% from 2.1%, signaling growing confidence in sustained inflation above its 2% target. This hawkish tilt contrasts with China's expected growth slowdown, which could weigh on regional currencies. The yen strengthened as traders anticipate potential future BoJ tightening, especially with inflation expectations firmly anchored above target. Technical analysis shows USD/JPY breaking below the 155.50 support level, with next support at 154.80. Resistance now sits at 156.00. The diverging monetary policy outlook between the Fed's potential pause and BoJ's hawkish stance could drive further yen appreciation, making short USD/JPY positions attractive for momentum traders.