USD/JPY slips as JGB yields surge and BoJ signals caution – BBH

USD/JPY had a brief uptick after the US and Japan confirmed existing currency policy and did not discuss foreign exchange levels. USD/JPY subsequently edged lower while Japanese government bond yields are breaking higher at the long-end of the curve, BBH FX analysts report.

JPY steady as BoJ eyes June policy review

"Bank of Japan (BOJ) board member Asahi Noguchi acknowledged the 'sudden' move in yields but noted 'I can’t simply conclude that they are abnormal…so I believe it would be inappropriate to intervene without reason and attempt to manipulate the situation in any way'."

"The BOJ is currently trimming its JGB purchases by about ¥400 billion per quarter and will conduct an interim assessment of the plan for the reduction of its purchase amount of JGBs at the June 2025 Monetary Policy Meeting (MPM). Given the recent turmoil in the JGB market, we expect the bank to maintain the current pace and underscore that it stands ready to make one-off purchases as needed to smooth market functioning."

"Japan private sector activity slips back into contraction in May. The composite PMI fell to 49.8 vs. 51.2 in April, the services PMI dropped 1.6 points to 50.8, and the manufacturing PMI improved 0.3 points to 49.0. The swaps market ignored the data and still implies 50bps of BOJ rate hikes to 1.00% over the next two years."