The trading volume of USD/JPY options continues to shrink, hitting a one-month low as investors await the Bank of Japan's policy decision on Thursday for clues on the currency pair's direction. Data from the Depository Trust & Clearing Corporation (DTCC) shows Monday's trading volume was the lowest this month, with little improvement on Tuesday. This reflects limited market interest in trading the world's most liquid currency pair.

The pair's movement will also be influenced by the Federal Reserve's policy decision, expected later on Wednesday (US Eastern Time). "USD/JPY has struggled to break the 153.30 resistance level, which is crucial for gaining upward momentum," said Antony Foster, head of G10 spot trading at Nomura Securities in London. The pair recently peaked at 153.27 before retreating to 152.28 at the time of writing, remaining largely flat.

Since Sanae Takaichi's victory in the LDP leadership race earlier this month—paving her way to become Japan's next prime minister—the yen has traded in a tight range against the dollar. Expectations of potential fiscal easing under Takaichi and slower BOJ rate hikes initially weakened the yen, but safe-haven demand amid US-China trade tensions has capped further depreciation.

While most economists expect the BOJ to hold rates steady at its first meeting under Takaichi's administration, markets will scrutinize the decision for hints on future policy moves. "Sentiment toward USD/JPY is currently cautious rather than aggressive," noted Ivan Stamenovic, head of G10 FX trading for Asia-Pacific at Bank of America.