MUFG: USD/JPY - FJElite

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 risk1, - 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.

At the same time. Treasury Secretary Scott Bessent attempted to downplay criticism of the recent decision to expand the buyback program for older US government securities. The US Treasury announced it plans to double the size of its long-dated bond buybacks starting from today’s operation from USD2 billion to USD 4 billion. He stated that the decision was aimed at quelling a “fever" in the bond market. He believes “my job is to try to push things back towards equilibrium" although he doesn’t believe that he can change the equilibrium price. He then went on to downplay concerns that the recent rise in US government yields have been driven by the scale of US borrowing highlighting that “if that were true, Treasuries would be underperforming German securities".