The issue surrounding the replacement of the governor of the Japanese central bank is an additional factor that has the potential to support an increase in USD/JPY going forward.

The US dollar continued to maintain its dominance in trading earlier this week, on February 6. Surprises in the Non-farm Payroll data last week continued to pressure the greenback's rivals. Meanwhile, USD/JPY was also disturbed by the issue surrounding the replacement candidates for the governor of Japan's central bank.

USD/JPY Daily

The Nikkei, Japan's leading business newspaper, reports that Deputy Governor Masayoshi Amamiya may succeed Haruhiko Kuroda as Governor of the Bank of Japan (BoJ), with an official announcement later this month. The news had a negative impact on the yen, as Amamiya was known as the most dovish of the candidates to replace Kuroda.

As is known, BoJ Governor Haruhiko Kuroda will end his term of office on April 8. Market participants have long been waiting for this moment with the hope that the BoJ will change its monetary policy approach to a more hawkish one after the change in leadership.

Hawkish expectations were one of the factors that pushed USD/JPY out of the 150.00 to 130s range in the last three months or so. But Amamiya's appointment may crush all those hopes.

"Amamiya has assisted Kuroda since 2013 on monetary policy and is considered the most dovish of the candidates, dashing hopes that the BoJ's policy normalization can progress under the new chairman," said a Saxo Bank strategist.

USD/JPY scored a two-week record high at 132.28 in the Asian trading session on this issue. His position only receded after Deputy Chief Cabinet Secretary Yoshihiko Isozaki told reporters that the Nikkei report was untrue.

"Our basic stance is that we will appoint the most deserving person (as BOJ governor) by the time Kuroda's term ends," Isozaki said.

Despite Isozaki's denial, this rumor indicates additional factors that could potentially support USD/JPY's rise going forward. USD/JPY has receded into the 131.70s at the time of writing but remains bullish.