USD/JPY trades with positive bias, remains below 157.00 as focus shifts to BoJ meeting

• USD/JPY attracts some buyers on Thursday, albeit the uptick lacks follow-through.
• The Fed’s hawkish outlook overshadowed the softer US CPI and lends some support.
• Traders seem reluctant and look to the BoJ decision before placing directional bets.

The USD/JPY pair ticks higher during the Asian session on Thursday and looks to build on the overnight bounce from the 155.70 area or a multi-day low touched in reaction to softer US consumer inflation figures. Spot prices, however, lack bullish conviction and currently trade around the 156.75-156.80 region as the focus now shifts to the Bank of Japan (BoJ) policy meeting.

Heading into the key central bank event risk, the Federal Reserve's (Fed) hawkish surprise on Wednesday acts as a tailwind for the US Dollar (USD) and turns out to be a key factor lending some support to the USD/JPY pair. In fact, policymakers believed that fewer rate cuts were needed this year as inflation is expected to trend higher than previously estimated and now see just one rate cut in 2024 as compared to three projected in March. 

The outlook, to a larger extent, overshadowed the softer US Consumer Price Index (CPI) print, which was unchanged in May, for the first time since last June, and edged down to 3.3% on a yearly basis from 3.4% in April. Furthermore, the US Bureau of Labor Statistics (BLS) reported that the annual core CPI, which excludes volatile food and energy prices, fell to a more than three-year low of 3.4% as compared to the 3.6% in April and 3.5% expected. 

Nevertheless, the shift in the Fed's projections should underpin the USD and support prospects for a further appreciating move for the USD/JPY pair. Bulls, however, seem reluctant amid uncertainty if the BoJ will announce a reduction in the monthly government bond purchases amid a weaker economy. Hence, the focus will remain on the outcome of the highly-anticipated two-day BoJ meeting, scheduled to be announced on Friday. 

In the meantime, Thursday's US economic docket – featuring the Producer Price Index (PPI) and the usual Weekly Initial Jobless Claims data – will be looked upon for short-term trading opportunities later during the early North American session. Apart from this, the broader risk sentiment, which tends to drive demand for the safe-haven Japanese Yen (JPY) might provide some impetus to the USD/JPY pair.