MUFG Research discusses the BoJ policy trajectory and USD/JPY outlook. MUFG maintains a short exposure in USD/JPY going into this week's BoJ policy meeting.

"Our analysts in Tokyo still expect the BoJ to abandon YCC this year but have recently pushed back the timing to the July policy meeting from June. Recent dovish comments from new Governor Ueda support their decision alongside their expectation that Prime Minister Kishida will call an early election in the coming months which would make it more difficult for the BoJ to adjust policy settings in the near-term," MUFG notes. 

"While the prospect of an imminent shift in BoJ policy has diminished recently, we still believe that the yen will strengthen further this year and view recent weakness as only temporary. We expect USD/JPY upside to be capped between 135.00 and 137.00 in the near-term," MUFG adds.