The yen dropped 0.2 per cent to 142.41 per dollar in early Asian trade, reversing some of the nearly 2 per cent gain it made last week on the back of the dollar’s decline

The yen slipped marginally on Monday as the Bank of Japan (BOJ) kicked off its two-day monetary policy meeting, with traders awaiting a decision on whether the dovish central bank could finally unwind its ultra-loose monetary settings.

In the wider market, currencies started the week on a cautious note after large swings last week mainly led by a slew of central bank meetings, which included rate decisions from the Fed, the ECB and the BoE.

The yen dropped 0.2 per cent to 142.41 per dollar in early Asian trade, reversing some of the nearly 2 per cent gain it made last week on the back of the dollar’s decline.

The Japanese currency has had a volatile few weeks as markets struggle to get a grip on how soon the Bank of Japan could phase out its negative interest rate policy, with comments from Governor Kazuo Ueda earlier this month initially triggering a huge rally in the yen.

That was later reversed on news that a policy shift was unlikely to come in December, and investors now await Tuesday’s BOJ decision for further clarity on the bank’s rate outlook.

The meeting will be relevant and important in terms of what the Bank of Japan does, and there are some in the market that still expect that maybe there is a surprise, said Rodrigo Catril, senior FX strategist at National Australia Bank.

We tend to lean to the idea that they are still on wait-and-see mode for more evidence, especially the labour market and wages growth are increasing towards the 2 per cent level, at the minimum, Catril said.

The best case scenario would be for the bank to set the stage for things to come in 2024, conditional on these economic outcomes being delivered, Catril added.

Against the euro, the yen dropped 0.1 per cent to 155.11. The Australian dollar gained 0.13 per cent to 95.45 yen.