Yen Underperforms On Higher Core Yields, BoJ In Focus Today

USD/JPY stayed on the front foot post the Asia close on Monday. Some selling interest was evident on a move above the 143.00 level. We last tracked near 142.80, a yen loss for Monday's session of close to 0.50%. Earlier Monday lows rested close to 142.00.

• Yen underperformed on a core yield recovery through Monday's session. There was pushback from some Fed officials on 2024 market pricing.
• US yields were 1-4bps firmer across the curve. Late in the session a WSJ article by Nick Timiraos quoted San Fran Fed President Daly, which stated cuts could be needed next year to prevent over tightening. She added her outlook for rates and inflation were very close to the median projections presented by the Fed last week.
• US-JP 10yr yield differentials have stabilized somewhat in the low +320bps region.
• Local focus today is all on the BoJ decision. Our expectation remains that the BoJ will raise its policy rate by 10 basis points (ending NIRP) in April. However, this week's MPM is pivotal if an earlier exit from NIRP in January 2024 is under consideration. See our full preview here.
• Note overnight JPY vol is above 32% the highest since the mid-year BoJ policy meeting.