The BoJ opted for a YCC tweak with hawkish undertones in the statement as the Bank now highlights upward movements in medium to long-term inflation expectations and greater upside risk on the inflation outlook. However, this wasn't accompanied by upward revisions to FY2024/25 inflation forecasts (more relevant to policy), which came as a surprise.

The YCC tweak doesn't come as too much of a surprise, reflecting the backdrop of relatively strong inflation, ongoing fiscal support, an uber-cheap JPY, and political concerns around the negative cost of living impact of higher inflation. The macro story of a move was always more compelling than the BoJ rhetoric. By extension, USD/JPY likely has further room to run lower.