📝BoJ Might Review YCC If Inflation Pressures Broaden: Maybank

retracement lower in UST yields dragging on USDJPY yesterday, markets also saw increased bets on a tilt towards hawkish signalling from BoJ after SNB unexpectedly hiked by +50bps. Recent external developments (larger Fed move, unexpected hike from SNB, hawkish signalling from ECB) as well as domestic developments (discontent on weaker JPY impinging on household spending power) likely added to pressures on BoJ to tilt hawkish in tones. As we write though, BoJ stood pat on policy settings, including YCC, sending USDJPY higher above 134. There was arguably less of an impetus for an immediate move given that domestic prices have yet to see runaway momentum (Apr CPI at 2.5%) and the economy is still in a fragile state. We watch ongoing BoJ commentary. There might still be some hawkish hints/nuances, including chances for a YCC review going forward if inflation pressures broaden more sustainably. If so, up-moves in USDJPY could be capped, and longer-term risks for the USDJPY pair could still be skewed to the downside. Interim high near 135.60 could be a key resistance. Bias to sell USDJPY rallies near-term. On the USDJPY daily chart, bullish momentum has largelymoderated, while RSI has exitedoverbought conditions. Support at 130.80 (21-DMA), 129.50 (50-DMA). - Maybank FX Research