The Bank of Japan has been on the far dovish side of the policy spectrum - in stark contrast with its major counterparts - with negative rates, quantitative easing and yield curve control. Its policy meetings were usually non-events, but this changed in December, when it surprised markets by widening its target for the 10-year JGB yield to 0.5%.
The new higher cap has already come under attack and markets now await Wednesday's latest policy decision by the BoJ, to see if further changes are in store. The event has the potential to spur volatility and determine the trajectory of the Japanese Yen.
Inflation in the US meanwhile eased further in December, according to last week's CPI data and markets expect further downshift in the Fed's pace of tightening. CME's Fed Watch Tool prices-in a small 25 basis points rate increase at the next meeting. 
After the CPI report, Fed's Harker who is a voter this year, pointed to more moves ahead, but appeared to agree with market pricing, in regards to their size. He expressed the view that "hikes of 25 basis points will be appropriate going forward". 
Expectations for a less aggressive Fed and for policy normalization by the Bank of Japan have harmed USD/JPY, which runs its third straight losing month, having erased more than half of the 2022 rally. The day started with new eight-month lows and this creates risk for further losses towards and beyond 122.62.
USD/JPY however finds support and defends the May 2022 lows, after the Relative Strength Index hit oversold territory. This gives greenback the opportunity return above 130.00, but the upside looks unhospitable. The broader 134.00-11 region contains significant roadblocks and clearing them will require strong catalyst.
Senior Market Specialist
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 16 Jan 2023 https://www.boj.or.jp/en/announcements/release_2022/k221220a.pdf
Retrieved 16 Jan 2023 https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html