The Japanese Yen (JPY) is trading flat to the US Dollar (USD) while underperforming all of the G10 currencies in an environment of broad-based USD weakness, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

USD/JPY bias turns bullish above 158

"The yen’s relative underperformance is notable, following last week’s fundamentally-driven decline that followed softer than expected labor cash earnings data. We fear the risk of a renewed delay to the BoJ’s tightening plans and note the bullish reversal in US-Japan spreads – a headwind for the yen."

"Sentiment is delivering added pressure, as we note the continued moderation in the premium for protection against JPY strength. USD/JPY technicals appear to be leaning bullish, with a bias that is underscored by Friday’s range break and short-lived push above 158. We note the importance of the January 2025 high at 158.87 and the July 2024 high at 161.95."