USD/JPY holds above the 148.00 mark, investors await BoJ rate decision

The USD/JPY pair trades in negative territory for the third consecutive day during the early Asian session on Tuesday. The consolidation of the Greenback and US yields weighs on the USD/JPY ahead of the key event. Market players will closely monitor the Bank of Japan (BoJ) monetary policy meeting on Tuesday. The pair currently trades around 148.08, up 0.03% on the day.

Traders place lower bets for rate cuts from the Federal Reserve (Fed) in 2024. They stand at 142 basis points (bps) of cuts from 175 bps last week. The markets are pricing in 42% odds that the Fed could lower rates in March, a slide from 70% just a week ago, according to the CME's Fed watch tool. This, in turn, lends some support to the US Dollar (USD) and acts as a tailwind for USD/JPY.

On the Japanese Yen front, the Bank of Japan is likely to maintain the YCC and interest rates unchanged at its January meeting on Tuesday. Traders will take more cues from the press conference. BoJ’s Governor Kazuo Ueda might offer some hints about when and how the 'normalization' process and eventual shift away from negative interest rates will unfold this year. Last week, Japan's Core Consumer Price Index (CPI) rose 2.3% in December 2023 from 2.5% in November. The report further undermined the odds of a shift in the current monetary policy.

The BoJ interest rate decision and the press conference will be in the spotlight on Tuesday. This event is likely to trigger volatility in the market. Later this week, attention to shift to the US Gross Domestic Product (GDP) for Q4, due on Thursday, and the Core Personal Consumption Expenditures Price Index (Core PCE) on Friday. These data and events could keep a clear direction for the USD/JPY pair.