BoJ Tightening May Limit Yen Appreciation

The yen's appreciation potential may be running out as markets price in around 45 basis points of BoJ tightening by year-end, according to MarketPulse.com. The policy rate is expected to approach the neutral level of 2% within twelve months.

While a 50-basis-point September hike and back-to-back increases remain unlikely, potential changes to GPIF's asset allocation have also supported the yen. However, speculation surrounding the GPIF may provide increasingly limited support for the currency as investors await confirmation.

A key technical support area for USD/JPY is at 155, with consolidation around this level more likely than an immediate move towards the 150-152 range.