Rabobank’s Benjamin Picton notes that despite supportive Japanese fiscal policy and expectations for loose Bank of Japan settings, the Japanese Yen has firmed slightly, leaving USD/JPY trading softer. Picton highlights comments from Finance Minister Katayama about close coordination with the US Treasury and readiness to stabilise markets, alongside underperforming 10-year JGBs and a steepening 2s10s curve.

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"Despite this cocktail of accommodative policy, USDJPY is dealing a little softer as Finance Minister Katayama indicated that she had been in close contact with US Treasury Secretary Bessent regarding stabilisation of the exchange rate."

"Katayama also said that she is prepared to take measures to stabilize markets today if necessary."

"Beyond the immediate implications for JGBs, the Japanese Yen and – by extension – the Yen carry trade, this is a momentous development geopolitically."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)