Synopsis:

The Bank of Japan's (BoJ) latest decision surrounding its Yield Curve Control (YCC) has caused the USD/JPY pair to soar above the 150 mark. With the 10-year JGB yield 1% cap being transformed into a mere reference point and the inflation forecasts falling short of establishing a concrete exit from the YCC policy, the stage seems set for the currency pair to touch 152, possibly leading to forceful FX interventions by the central bank.

Key Insights:

1. BoJ's Disappointing Decision: The much-anticipated exit from the YCC strategy didn't materialize, causing the USD/JPY to trade above 150.

2. Change in 10-Year JGB Yield Approach: Previously seen as a strict threshold, the 1% 10-year JGB yield is now simply a guiding point for BoJ's market operations.

3. Concern Over JGB Yield Spikes: The BoJ's cautious approach suggests apprehensions regarding sudden surges in JGB yields.

4. Inflation Forecasts Lack Punch: The BoJ's target of CPI excluding food is set at a modest 1.7% for FY25, failing to consistently surpass the 2% mark.

5. Potential USD/JPY Surge: Today's BoJ decisions indicate the potential for USD/JPY to climb further, reaching levels around 152.

6. Intervention on the Horizon: Such a spike in the currency pair might compel the BoJ to step in with a forceful FX intervention.

Conclusion:

The BoJ's latest announcement reflects its cautious approach concerning the YCC strategy and JGB yields. This decision has fueled a rise in the USD/JPY trading range, and if it continues in this trajectory, we might witness proactive measures from the BoJ to curb the currency's strength.