MUFG Research discusses USD/JPY outlook in light of this week's September BoJ meeting.

"We see scope over the near-term for the US dollar to advance further versus the yen. The reaction today to the BoJ communications and Governor Ueda’s press conference highlighted the fact that current market pricing may have become excessive. The bar was low for the BoJ delivering a less hawkish message,"MUFG notes.

"Is the BoJ moving faster now? Governor Ueda hinted that might be the case but not enough to convince the markets. We expect the next hike in January 2027 and then in June, taking the policy rate to 1.75%. Near-term USD/JPY could advance further but the rates curve is reasonably priced and further hikes and intervention risks will curtail the scope for the move higher in USD/JPY. We would still expect USD/JPY buying to fade ahead of a break above the 160.00-level," MUFG adds.