USD/JPY Breaks Trend as BOJ Hawks Echo Bessent's Comments

A recent bearish reversal in USD/JPY has led to a break of its August uptrend, following hawkish comments from BOJ board member Takata and BOJ Governor Ueda.

Takata's remarks, made in Sapporo earlier this session, suggested the pace of rate hikes should be assessed at every meeting, rather than assuming tightening will continue at roughly twice-yearly intervals. He also openly discussed accelerating the pace of tightening, mirroring comments from US Treasury Secretary Scott Bessent over the weekend.

Ueda's hawkish tone was evident in his comments on inflation risks and FX moves during the G20 finance ministers meeting, where he noted that the BOJ is scrutinizing yen weakness among factors contributing to upside price risks. This marked a shift from earlier this year, when Ueda emphasized easing pressures.

The latest developments have sparked a bear flattening of the JGB curve, with two-year yields rising 6.2bp and five-year yields up by 5.5bp. While it's unclear whether these moves will be sustained, they do point to market expectations that the BOJ may act on inflation by lifting real policy rates out of negative territory.