USD/JPY Aims to Extend Rally Above 160.00 Amid BoJ Hawkish Stance Doubts

The Japanese Yen (JPY) is under pressure on Tuesday as financial markets question the Bank of Japan's commitment to its hawkish policy stance amid growing economic concerns. The USD/JPY pair trades 0.16% higher at around 159.70 during the European trading session.

Economists at Societe Generale note that Japan's latest GDP release missed expectations, with consumption and capex disappointing. They add that the inflation backdrop offers some support to tightening prospects, but caution that continued weakness in these areas would raise concerns over a faster and higher hiking path for the BoJ.

The USD/JPY pair is trading above the 50% retracement at 159.64, suggesting a fragile consolidation after the recent pullback. Immediate resistance on the topside is located at the 20-day EMA at 159.89, followed by the 61.8% retracement at 160.67.

The Bank of Japan's policy meeting minutes are due to be released on Wednesday, which may provide further insight into the central bank's stance on interest rates.