USD/JPY started the week less actively compared to the previous two weeks.
Yen rose a bit as Masato Kanda, Japan's Vice Minister of Finance for International Affairs, stated that an adequate response to excessive currency movements may occur. Finance Minister Shunichi Suzuki also mentioned that they will continue to monitor the forex market, fueling rumors that authorities may intervene if yen weakens significantly.
Another reason for the rise of yen lies with the latest monetary policy meeting by the Bank of Japan, during which the members mentioned the high probability of consumer inflation slowing down but not falling below 2% by the middle of the current fiscal year. One of the nine members of the board of directors even reminded the bank of the need to review its conflicting yield curve control policy at an early stage.
However, the Bank of Japan's negative interest rate policy will remain in place, according to Governor Kazuo Ueda. He ruled out the possibility of any changes to the ultra-loose monetary policy, which shows a significant divergence from the hawkish outlook of the Federal Reserve.
Last week, Fed Chairman Jerome Powell confirmed that the central bank will raise interest rates again this year. He added that he does not plan to lower rates in the near future until he is confident about reducing inflation to the target level of 2%. This supported dollar and helped limit losses.
Market players should wait for strong selling before confirming that prices reached their peak and will start a correction. It may also be preferable to wait on the sidelines before the comments from Fed Chairman Jerome Powell and Bank of Japan Governor Kazuo Ueda during the ECB Forum on Wednesday. The US macroeconomic data scheduled for release this week also remain important as the latest inflation data will impact expectations regarding the Fed's policy outlook, which could push dollar.