U.S./Japan 10-Year Yield Gap Widens, Japanese FinMin Resumes Jawboning

Spot USD/JPY found support at Y145.55 and recouped its initial losses over the Tokyo fix, returning to neutral levels. This brings the pair closer to recent cyclical highs as it last trades at Y145.73, just a handful of pips shy of the recent Y145.90 cycle high.

• The latest uptick coincides with renewed strength in the broader USD, which sees the BBDXY index test yesterday's highs. There has been little in the way of overt headline flow around the move.
• Cash trading in U.S. Tsys and JGBs re-opened in Tokyo. U.S./Japan 2-year yield differential is 1.6bp wider, while 10-year gap has grown 10.1bp. U.S. yield curve has bear steepened, which is less pronounced in Japan, with 10-year JGB yield anchored by confidence in the BoJ's YCC framework.
• Japanese officials have resumed their jawboning, which may have kept a lid on USD/JPY, despite the upswing in greenback crosses. FinMin Suzuki said they are watching FX moves with a strong sense of urgency and will take appropriate action if needed.
• Suzuki added that Japan has been in talks with international partners regarding FX dynamics and has secured some understanding from the U.S. on its recent currency intervention. He noted that Japan will further explain its stance on intervention at the G20 summit.