The Japanese Yen (JPY) edges lower during the Asian session on Wednesday in reaction to weaker-than-expected domestic data, though it lacks follow-through selling as traders seem reluctant ahead of the Bank of Japan (BoJ) decision.

The Japanese central bank is widely anticipated to keep the short-term interest rate steady at 0.50% amid the uncertainty over US President Donald Trump's trade policies and their impact on the economy. Hence, investors will look for signals on the timing and the scope of future rate hikes by the BoJ.

The focus will then shift to the outcome of a two-day FOMC policy meeting due to be announced later during the US session. The US central bank is also expected to leave interest rates unchanged, though the markets are pricing in the possibility of three 25 basis points rate cuts by the end of this year.

This marks a big divergence in comparison to the BoJ's hawkish stance, which has resulted in the recent sharp narrowing of the US-Japan rate differential and should continue to act as a tailwind for the lower-yielding JPY.

Source : Fxstreet