BOJ Disappointment Leaves Yen Vulnerable to Further Declines

The yen is vulnerable to further declines due to thin Tokyo conditions and the BOJ's recent decision to raise rates to 1.25 percent, which fell short of hawkish expectations.

While intervention remains a risk, it currently looks like a top-side constraint around the trade rather than the central trade itself.

USD/JPY has been pushed higher by traders reassessing the path ahead, but swaps now price less than a 20 percent chance of another BOJ hike at the end of October and almost 90 percent for December.

The BOJ's decision was seen as a cold splash of water for markets that had started to wonder if USD/JPY was on the cusp of a more durable turn, and a rate check has been reported, which could further limit complacency on the topside.