USD/JPY flows: Knee-Jerk Sharply Higher after BoJ's Dovish Statement

BoJ's statement tries to kick the can down the road
To most market participants' surprise, not only the BoJ did not aggressively bring rates to zero percent, they did not even change their forward guidance. Given the latest inflation dynamics, it is surprising BoJ would not seize the time to hint a change of monetary policy. Yet, if BoJ only want to wait for the perfect moment to exit ultra-loose monetary policy, their rationale is still supported by the fact labor cash earning has not reached 2%. While BoJ kept forward guidance "The Bank will continue with Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control, aiming to achieve the price stability target, as long as it is necessary for maintaining that target in a stable manner. It will continue expanding the monetary base until the year-on-year rate of increase in the observed CPI (all items less fresh food) exceeds 2 percent and stays above the target in a stable manner. " intact, the text within the statement has stated "The year-on-year rate of increase in the CPI (all items less fresh food) is likely to be above 2 percent through fiscal 2024", which seems to suggest BoJ do see an exit of ultra-loose monetary policy but is waiting for wage growth to further pick up.
As a knee-jerk response, the USD/JPY is up to 143.78 before retracing some gains to trade 0.48% higher at 143.44.