MUFG’s Lee Hardman notes that the Japanese Yen (JPY) has strengthened, driving USD/JPY back towards 153.00, as comments from US Treasury Secretary Scott Bessent reinforce expectations of policy changes in Japan. The bank highlights growing market conviction that the Bank of Japan will accelerate rate hikes this month, helping the Yen rebound without further joint FX intervention.

Yen gains on BoJ shift expectations

“The yen has continued to strengthen overnight resulting in USD/JPY falling back towards the 153.00-level.”

“The stronger yen has been encouraged by bullish comments from US Treasury Secretary Scott Bessent overnight who stated that “I am the house now, so when we intervene with the Japanese yen, I have pretty good insight into what the Japanese, what the Bank of Japan is going to do, what Japanese policymakers are going to do…and you can bet against me if you want”.”

“He pushed back against his critics who have criticized the decision to intervene alongside Japan to support the yen by stating “whenever people say, ‘Oh, well, Treasury Secretary is taking a risk’, – well, it’s my dream, I have asymmetric information”.”

“The comments will reinforce expectations that the Japan has agreed to change domestic policies to provide more support for the yen and back up support from joint intervention.”

“It already appears increasingly likely the BoJ will speed up the pace of rate hikes this month which is helping the yen to rebound without the need for further intervention.”