Synopsis:

ANZ sees limited near-term downside for USD/JPY and expects the pair to consolidate above 145, citing BoJ caution, global uncertainty, and overextended short positioning.

Key Points:

• JPY strength narrative softens:
  While JPY sentiment has been supported by global slowdown fears and expectations for BoJ normalization, the central bank is turning more cautious amid tariff risks and a weakening global outlook.

• BoJ outlook skews dovish:
  The BoJ’s updated projections show downside risks to both growth and inflation in 2025, reducing the urgency for further rate hikes despite persistent services inflation.

• USD/JPY technical floor near 140:
  ANZ sees the 140 level as a firm support, with recent dynamics and positioning suggesting that a clean break below is unlikely in the near term.

• Positioning supports a rebound:
  With speculative positioning heavily skewed short USD/JPY, the risk of a short squeeze may push the pair back toward 145 and beyond, echoing price action seen in March.

Conclusion:

In the absence of a hawkish BoJ pivot or major positive shocks to global sentiment, USD/JPY is set to consolidate higher, with 145+ levels likely as short positions unwind and the BoJ remains cautious.