MUFG Research previews this week's April BoJ policy meeting.

"The BoJ will meet tomorrow with expectations of a rate hike having come down notably...A more dovish communication from the BoJ and the potential for the Fed being more hawkish is a recipe for renewed upside momentum in USD/JPY through the 160-level. That would likely coincide with renewed instability in the JGB market as fears over the BoJ being behind the curve return. A more dovish communication would also reinforce the impression that PM Takaichi is dictating the overall monetary stance that would further reinforce Japan selling risks," MUFG notes.

"The BoJ therefore needs to limit this risk and convey a more hawkish message on the outlook for policy...Abrupt moves have not yet taken place although the latest IMM speculative positioning data did reveal a pick-up in yen selling that could be an indication of increased expectations of a move higher in USD/JPY. The BoJ’s communication tomorrow will be key for avoiding a bigger move higher in USD/JPY," MUFG adds.