* USD/JPY rallied to a new 22-month high of 123.65 as the BOJ eased policy more aggressively than expected. The BOJ not only announced extra funds for banks, but also effectively revived its zero-interest-rate policy, introduced an inflation target and signaled a quantitative easing in monetary policy. The BOJ said that in the future it would target its policy on boosting the amount of bank reserves in its current account balance to 5 trillion JPY from the current 4 trillion yen.
While saying this would replace its interest rate target, it added that the key overnight call loan rate was expected to trade close to 0%. The BOJ also said it would increase its monthly outright purchases of JGBs if needed, up to a total of around 11 trillion yen and, while denying a specific inflation target, said it would keep all of these measures in place until annual CPI had risen to around 0%.
The pair fell pretty hard on profit-taking. Speculation that US President Bush might strike a more tolerant note on JPY weakness at a meeting with soon-to-be-leaving Japanese PM Mori later today was not held widely.
In Asia, BOJ Governor Hayami said Monday that he thought there was no need for the Japanese authorities to attempt to further weaken the yen, adding that it should be left to markets as to whether the currency will weaken or not.
Some government officials, private economists and traders hold the view that Japan should promote yen depreciation as a step in supporting its economy.
The outlook is mixed to slightly bearish.

Support: 122.50 (Gann 50-point pivot; targets: 122.00/123.00), 122.09 overnight low), 121.05 (Gann 50-point pivot; targets: 120.55/121.55), 119.65 (Gann 50-point pivot; targets: 119.15/120.15), 119.00 (38.2% Fibonacci retracement level of the August 1998-December 1999 downtrend), 118.25 (Gann 50-point pivot; targets: 117.75 /118.75), 118.87 (20-day moving average), 117.13 (60-day moving average).
Resistance: 123.65 (overnight high; 22-month high), 124.00 (Gann 50-point pivot; targets: 123.50/124.50), 124.75 (May 29, 1999, peak), 125.50 (Gann 50-point pivot; targets: 125.00/126.00).