USD/JPY Rebounds But Can't Sustain Break Of 134.60.

USD/JPY surged higher as the BoJ left policy rates on hold and kept YCC parameters unchanged. We got above 134.60, which was around yesterday's highs. We were around 133.40 prior to the announcement. From here we subsequently sank sub 132.50 before rebounding. We currently sit around 133.60/70 at the time of writing.

• There wasn't a great deal of changes in the BoJ statement, although the sentence on 'it is necessary to pay due attention to developments in financial and foreign exchange markets and their impact on Japan's economic activity and prices' was noteworthy.
• Whilst intervention in FX markets is at the discretion of the Ministry of Finance, the BoJ's view will still carry weight.
• The focus will now shift to Kuroda's press conference, where he is likely to pressed on any potential policy tweaks at the July policy meeting and FX intervention risks.
• 1 week implied USD/JPY vol has come off recent highs, back to 19.5%, from 21.50% prior to the BoJ announcement.
• Relative policy divergences still point to higher USD/JPY levels over the medium term and JPY underperformance on a cross basis. Just above 135.50 remains the recent cyclical high.