BoJ Expected to Hold Rates at 0.75% as USD/JPY Eyes 159.45-161.95

The Bank of Japan is widely expected to hold its benchmark interest rate unchanged at 0.75% at its upcoming meeting, as policymakers navigate a delicate balance between rising inflationary pressures and slowing economic growth. Higher oil prices stemming from the US-Iran conflict in 2026 have added stagflationary headwinds to Japan's economy, weighing on consumer confidence and complicating the BoJ's normalization path. While inflation remains elevated, the deteriorating growth outlook limits the central bank's ability to pursue further tightening. USD/JPY is trading near key technical levels, with resistance identified at 159.45 and an extended target at 161.95 should dollar strength persist. Support is seen around the 157.00–158.00 zone. The pair's trajectory remains heavily influenced by the US-Japan interest rate differential, which continues to favor the dollar. Traders should watch for any shift in BoJ forward guidance or commentary on intervention thresholds, as Japanese authorities have historically stepped in near the 160.00 level to curb excessive yen weakness.