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FXstreet.com (Barcelona) - Stalled at 114.70/80 around the European opening, the EUR/JPY started to ease back and retrace the extended upside seen since early Asian hours triggered by expectations of a BoJ announcement of a 2% inflation target and a pledge of more easing steps at the 21-22 January meeting, as policymakers are pressured by new Prime Minister Shinzo Abe.

"By accompanying the new target with more stimulus, the BOJ hopes to show its determination to get the country out of deflation and fend off more radical demands from politicians, such as a revision to the BOJ Law guaranteeing its independence in guiding monetary policy", said a report from Reuters.

Meanwhile, Fitch rating agency threatened that sovereign downgrade to Japan will be considered unless action is taken to address the public debt situation: "This was no surprise given the existing negative outlook, but the remarks balance recent hopes that the Abe-administration's reflationary policy could actually be rating-supportive", wrote UBS analyst Gareth Berry.

The market has eased back to 114.10, as of writing. "Dips are likely to find that 112.02 (short term uptrend) and the 111.43/57 zone (October 2011 high, March 2012 high and the short term uptrend) offer good short term support", wrote Commerzbank analyst Karen Jones, biased for recovery while underpinned there.

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