USDJPY has pulled back from..............>

DOLLAR-YEN: USDJPY has pulled back from yesterday's FOMC-inspired spike higher,

and currently trades at ~110.25 in line with levels seen prior to the decision.

- With US real yields rising, particularly in the shorter end, the JPY's

strength looks stretched relative to the historical correlations between the

real yield spreads of the two countries.

- Japanese yields have edged slightly lower despite the BoJ's decision to reduce

the size of its purchases of JGBs with 3 to 5 years until maturity to Y300bn

from Y330bn previously.

- Declining inflation expectations continue to support private sector bond

demand in Japan, with 5-year breakeven inflation expectations declining ~10bp

since the start of the year even as US breakevens of the same maturity have

risen by 20bp.

- The BoJ's MonPol meeting concludes on Friday, no change is expected, with

focus set to fall on BoJ Gov. Kuroda's post-meeting press conference.

- Nearby FX option expiries of note at today's 10AM NY cut: 110.00($1.9bn),

110.50 ($791mln), 111.00($1.22bn)