Meanwhile, data showed that confidence among large Japanese manufacturers improved to a two-year high in the second quarter amid an improved economic outlook. Last week, the yen fell to multi-decade lows after the Finance Ministry appointed Atsushi Mimura as Japan’s top currency diplomat amid growing pressure to further defend the currency. Recently, the yen lost 2.3% against the U.S. dollar in June, extending its year-to-date decline to about 14% as the Bank of Japan took a more dovish approach to normalizing monetary policy than markets had expected.In contrast, a growing group of Federal Reserve officials are debating the merits of communicating how they will respond to economic outcomes that diverge from their baseline expectations. Moreover, the post-pandemic recovery has repeatedly surprised economists on Wall Street and at the Fed, leading to sudden changes in market expectations for U.S. interest rates.This has prompted a new discussion about how central bankers can better explain the risks and uncertainties surrounding the outlook for policy moves. Fed Governor Lisa Cook said last week, “The path of the economy is very uncertain – which means our response to it, which is the change in monetary policy, may also be uncertain – so why don’t we think about different scenarios?” and “It could be a very helpful tool.”Overall, the concept of using scenarios in policymaking has gained new momentum after former Fed Chairman Ben Bernanke recommended that the Bank of England make greater use of such scenarios in its April independent review of the central bank’s forecasting approach. The word “scenario” has been peppering Fed officials’ speeches and other public comments ever since, with several officials – such as Atlanta’s Raphael Bostic and San Francisco’s Mary Daly – using scenarios to paint different ways the economy could evolve, affecting the path of borrowing costs.The main tool the Fed uses to signal its expectations is a quarterly summary of individual officials’ forecasts for unemployment, GDP, inflation, and the interest rate. The median forecasts in this document, known as the Summary of Economic Projections, are not intended to be official baseline estimates but are often seen as such.Some officials, such as Chicago Fed President Austan Goolsbee and former Cleveland Fed President Loretta Mester, have suggested adding more detail to the baseline to better communicate potential policy paths to the public. USD/JPY Technical Analysis and Expectations TodayMy technical view on USD/JPY performance has not changed. The overall, trend remains bullish and recent gains have been enough to push all technical indicators into strong overbought levels. Technically, the trend may remain as it is until Japan intervenes in the forex markets to stem the yen’s losses or until markets and investors react to the Fed’s signals and US jobs numbers. Currently, the closest resistance levels for the currency pair are 161.75, 162.50 and 163.20, respectively.More By This Author:EUR/USD Analysis: Poised For Volatility Amid Key EventsGBP/USD Analysis: Bearish Dominance PersistsUSD/JPY Analysis: No New Ground Gained