The Japanese Yen (JPY) is weak, down 0.4% against the US Dollar (USD) and underperforming nearly all G10 currencies in an environment of broad-based USD strength, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

Focus on BoJ and risks of tightening delay

"The yen is hitting fresh multi-month lows and pushing to levels last seen in late January, pressured by concerns about the BoJ’s independence and its implications on the outlook for relative central bank policy following comments from Finance Minister Katayama that stated an intention to adjust the BoJ/government accord."

"An adviser to Prime Minister Takaichi is also said to have stated that the BoJ is unlikely to raise rates before March, a considerable delay to expectations that had previously centered around a Q4 hike (either October—passed, or December—next meeting)."

"The short-term rates market is reflecting this drift in expectations, and now pricing only 8bpts of tightening for December, 19bpts for January, and 23bpts by March. For USD/JPY, we continue to highlight the absence of any meaningful resistance ahead of 157.50."