The Bank of Japan caught markets off-guard on Tuesday, since it may have kept rates at -0.1%, but made a surprise chance to its yield curve control policy, in order "to improve market functioning and encourage a smoother formation of the entire yield curve'. 
The BoJ would step in to the bond market to prevent the 10-year JGB yield rising past 0.25%, but has now widened this target to allow it to move up to around 0.5%. This may be a seemingly small change, but may have well opened the door to the eventual normalization of the ultra-loose policies implemented by the central bank.
After its worst month since 1998, USD/JPY extends is loses in December and yesterday's BoJ announcement sparked a nearly 4% slump, sending it to four-month lows. It has now broken below the 38.2% of the 2021 low/2022 high rally, which brings the 50% level in the spotlight (127.26-126.35), although bears will likely need fresh impetus for taking it out.
On the other hand, the Bank of Japan still employees yield curve control, negative interest rates and quantitative easing, whereas the US Fed has vowed to increase rates further, despite last week's deceleration in the pace of tightening. 
Furthermore, USD/JPY defended the August lows (130.38) and finds some reprieve today, while the Relative Strength Index did not follow with lower lows. This divergence may give greenback the opportunity to react towards 135.00, but the upside looks unhospitable, since there are multiple roadblocks from that level on.
Caution is needed, since key data ahead can spark volatility and will likely determine the pair's next move. Inflation in the US has been moderating and on Friday, we expect the latest update in the form of the Personal Consumption Expenditures (PCE). On the same day we expect CPI inflation from Japan, which has been the rise, while a day earlier, the final US Q3 GDP figures are due.
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.
Retrieved 21 Dec 2022 https://www.boj.or.jp/en/announcements/release_2022/k221220a.pdf
Retrieved 03 Dec 2023 https://www.federalreserve.gov/monetarypolicy/fomcpresconf20221214.htm