Governor Ueda did acknowledge that market functioning has improved but we already know that and really the decision on changing YCC will at this juncture be more based on the fundamentals rather than the functioning of the markets, although future risks of dysfunctional markets could be part of the decision-making process. 

The market reaction to the Ueda comments suggests reduce speculation over a YCC change next week although we would argue that the forecast update could still provide the justification and for the BoJ changing YCC when yields are not under upward pressure and threatening the 0.50% band limit is a more ideal time than the opposite. 

CPI data on Friday will remain key and the data could prompt renewed speculation once more. But in a backdrop of improved risk appetite and soft-landing optimism, USD/JPY is understandably recovering some lost ground.