USD/JPY is expected to remain firm even after concerns about yen depreciation were raised at the Japan-US summit. Against a backdrop of expectations for higher US long-term yields, dollar buying and yen selling could continue even after renewed intervention concerns.
In the New York market on the 25th, USD/JPY temporarily fell to 156.94 yen, although there were also periods of dip-buying during the day. The 10-year Treasury yield, a gauge of US long-term yields, temporarily rose to around 5.2254%, its highest level since June 2007. EUR/USD fell to around $1.1386, but buying back gained momentum when US long-term yields turned lower, taking the day's high to $1.1411.
In today's Tokyo market, attention is expected to focus on whether dollar buying and yen selling will resume amid awareness of the divergence in monetary policy between Japan and the US. Yen buying following comments by Finance Minister Katayama expressing concern about yen depreciation, as well as intervention concerns arising from remarks by US Treasury Secretary Bessent, affected market sentiment.
There is still a view that the direction of monetary policy in Japan and the US favors a stronger dollar and weaker yen. While many comments signal the Federal Reserve's stance favoring additional rate hikes this year, the Bank of Japan remains relatively dovish, which is cited as a factor supporting dollar buying.
The market is also watching oil prices, the situation in the Middle East and US long-term yields. If the policy divergence between Japan and the US widens again, USD/JPY could test the upside. As this is the spot value date at the end of the half-year, real-demand flows toward the fixing rate could become more sensitive.