The Bank of Japan will hold its meeting on Friday, and the central bank is widely expected to leave its benchmark interest rate unchanged. Along with the decision, updated forecasts will be presented, which are expected to serve as the basis for rate forecasts, which currently assumes a 20bp rate hike by the end of the year. Another expected development is indications of when the BOJ plans to start reducing its massive balance sheet, or at least a sign of whether it should be done at all.

There is another issue. Core inflation has been declining for a year now, and the latest inflation report will be released on Thursday. If inflation continues to fall, it will limit the BOJ's options due to fears of deflationary pressures and will give the yen another bearish push.

The USD/JPY pair has finally breached the 155 level, and Japanese authorities have not reacted at the moment. It's worth recalling that earlier reports in the Japanese press suggested that a currency intervention to adjust the exchange rate was highly likely once the level of 155 was reached. The pair rose on Wednesday after the US durable goods report; in March, new orders for manufactured durable goods surged, signaling further resilience in the American economy and thereby increasing the chances of interest rates remaining at high levels.

The net short JPY position stood at -13.4 billion at the end of the reporting week, with minor changes over the past week, but the bearish bias is at its highest since February 2018. The price is above the long-term average and is steadily rising.

There are no objective reasons for a bearish reversal. If Japanese authorities do not intervene, the USD/JPY pair will continue to rise towards the technical level of 159.11–161.8% expansion from the correction in November-December. There are simply no other significant resistances in the foreseeable future. Potential intervention could lead to a decline in the exchange rate, but it's impossible to predict what level it will reach, as the outcome will depend entirely on the volume of intervention.