EUR/USD, USD/JPY flows: Takaichi Weakens the JPY

The JPY fell noticeably across the board in early European trading, as reports indicated that PM Takaichi had voiced concerns about further BOJ rate hikes in a meeting with BOJ Ueda – a further 25bps hike had been discounted by June.  Into mid-morning, the JPY partially retraced some of the losses versus the USD and on a cross rate basis.  We would feel that the BOJ still wants to normalise policy rates further and will still likely hike by 25bps in April or June.  However, rising bond yields due to QT are already causing more tightening and we then see the BOJ going on hold and scaling down QT.  Other currencies were subdued against the USD, though some traders noted that the fact that the U.S. has implemented 10% section 122 tariffs rather than 15% shows that the administration is less aggressive than Trump’s posturing.