• The Japanese Yen edges higher following the release of Japanese consumer inflation data.
• The uncertainty over the BoJ’s future policy steps keeps a lid on any further positive move.
• A modest US Dollar downtick exerts some pressure, though the downside remains limited.

The Japanese Yen (JPY) witnessed a dramatic intraday turnaround on Thursday and dived back closer to the YTD low touched the previous day, albeit it lacked follow-through amid the uncertainty over the Bank of Japan's (BoJ) future policy steps. In fact, the central bank indicated earlier this week that financial conditions would remain accommodative and fell short of offering any guidance about the pace of policy normalization. That said, a Bank of Japan source told the Nikkei newspaper that an early rate hike leaves room to consider rolling out another increase before the end of the year.

Moreover, data released this Friday showed that consumer inflation in Japan remains well above the BoJ's 2% annual target. Adding to this, the positive outcome of Japan’s spring wage negotiations indicated that most firms have agreed to the trade unions' wage rise demands, which is expected to push up inflation in the coming months and support prospects for further policy tightening by the BoJ. This, in turn, assists the JPY in attracting some dip-buying during the Asian session amid speculations that Japanese authorities will intervene in the markets to prop up the domestic currency.

The US Dollar (USD), on the other hand, ticks lower during the Asian session and erodes a part of the previous day's move up, which, in turn, is seen as another factor that exerts downward pressure on the USD/JPY pair. Meanwhile, investors seem to have digested the Federal Reserve's (Fed) less restrictive policy projection on Wednesday. This keeps the US Treasury bond yields elevated, which favours the USD bulls and warrants some caution before positioning for any meaningful depreciating move for the currency pair ahead of Fed Chair Jerome Powell's scheduled speech later this Friday.