The Japanese yen fell sharply against the U.S. dollar after Bank of Japan Deputy Governor Ryozo Himino confirmed the bank's policy of raising the key interest rate but refrained from giving any hints about when this might happen.

"It would be appropriate for the bank to continue, in line with improvements in economic activity and prices, to raise the interest rate and adjust the degree of monetary policy," Himino said Tuesday in a speech to local business leaders in Kushiro, Hokkaido, in northern Japan.

The uncertainty over the timing of a rate hike expressed by Himino triggered a sell-off in the yen, as market participants interpreted it as a signal that the Bank of Japan is not in a hurry to abandon its ultra-loose monetary policy. Investors, who had long anticipated tightening, were disappointed by the lack of clear guidance and chose to lock in profits, which put additional pressure on the Japanese currency.

At the same time, the strengthening of the U.S. dollar against a basket of currencies also contributed to the yen's weakness. The interest rate differential between the U.S. and Japan remains significant, encouraging capital inflows into U.S. assets and, consequently, exerting pressure on the yen.

While it is clear that the next step is still a rate hike, the timing remains uncertain. Earlier this summer, there had been speculation that the Bank of Japan could raise rates by the end of this year, but market expectations have since shifted. Expectations of a BoJ rate hike this year declined slightly after Himino's speech, likely pressuring the yen further. Current market pricing reflects about a 70% probability of such a move by year's end.

Himino identified the tight labor market and potential structural shifts in the global economy as risks that could push prices higher, while tariffs and commodity prices, amid a possible global slowdown, could exert disinflationary pressure.

While policymakers wait for economic data to assess the impact of U.S. tariffs, the latest inflation and economic indicators suggest that business activity remains relatively strong. Japan's economy grew more than expected in the second quarter, and the key price indicator has stayed at or above the Bank of Japan's 2% target for more than three years.

As for the current technical picture of USD/JPY, buyers need to regain control of the nearest resistance at 147.90. This would open the way to 148.25, though moving higher will be quite difficult. The most distant target is the 148.50 level. In the event of a decline, bears will attempt to retake control at 147.50. If they succeed, a breakout of this range would deliver a serious blow to bulls' positions and push USD/JPY toward the 147.20 low, with the prospect of reaching 146.80.