Ella 
The yen gained traction after Bank of Japan Governor Kazuo Ueda gave a speech on the policy decision.
The Bank of Japan decided to reduce the size of its bond purchases to 3 trillion yen per month.
The dollar faces challenges ahead of the Federal Reserve’s rate decision on Wednesday.
The yen extended its losses against the dollar as Bank of Japan board members decided to raise their short-term interest rate target by 15 basis points to 0.15%-0.25% from 0%-0.1% after a two-day meeting on Wednesday. In addition, the central bank decided to reduce the scale of bond purchases to 3 trillion yen per month starting in the first quarter of 2026.
Bank of Japan Governor Kazuo Ueda explained the reasons behind the unexpected policy move at a press conference. Kazuo Ueda believes it is appropriate to adjust the level of accommodation to achieve the 2% inflation target on a sustained and stable basis. Additionally, he stressed the need to taper Japanese government bond (JGB) purchases in a predictable manner while ensuring market stability through increased flexibility.
The U.S. dollar faces challenges ahead of the Federal Reserve’s interest rate decision on Wednesday. Markets expect the central bank to remain on hold in July, but expectations for a rate cut in September have increased. The expectation puts pressure on the dollar.
