USD/JPY advances to near 149.50, upside seems limited amid hawkish BoJ

• USD/JPY could encounter resistance as the likelihood of additional rate hikes by the Bank of Japan increases. 
• Traders await a set of crucial Japanese economic reports due Friday, including industrial production, retail sales, and Tokyo inflation data.
• The US Dollar gains strength, driven by rising US Treasury yields. 

USD/JPY retraces its recent losses from the previous session, trading around 149.40 during the European hours on Wednesday. However, the upside of the pair could be limited as the Japanese Yen (JPY) may find support amid rising odds of further interest rate hikes by the Bank of Japan (BoJ).

The BoJ is expected to raise rates from 0.50% to 0.75% this year. According to Bloomberg, overnight index swaps fully price in a rate hike by September, with a 50% chance of an earlier move as soon as June.

Meanwhile, traders in Japan are preparing for a series of key economic reports set to be released on Friday. These reports — covering industrial production, retail sales, and Tokyo inflation — could offer crucial insights into the BoJ’s future monetary policy direction.

The US Dollar (USD) strengthens amid rising US Treasury yields, with the US Dollar Index (DXY) — which measures the USD against six major currencies — approaching 106.50. At the time of writing, 2-year and 10-year US Treasury yields have climbed to 4.11% and 4.32%, respectively.

In recent developments, US President Donald Trump has ordered an investigation into potential tariffs on copper imports to support increased US production of this critical metal. Additionally, Trump confirmed that tariffs on Canada and Mexico will proceed once the current one-month delay period concludes next week.

On Tuesday, Thomas Barkin, President of the Federal Reserve Bank of Richmond, predicted another decline in Personal Consumption Expenditure (PCE) inflation later this week, emphasizing the Fed’s notable progress in curbing inflation. While maintaining an overall positive outlook, Barkin underscored the need for a cautious "wait and see" approach given ongoing policy uncertainties.