The US side, Mr. Bessent, is quite comfortable with Japan's action to address yen weakness, suggested by rate checks conducted by the New York Fed in January. The US is more supportive of Japan's intervention compared to 2022. Another important focus is his communication regarding the monetary policy of Japan. In October and January, the US Treasury clearly stated the importance of communication and normalization of monetary policy. If that stance is unchanged, there will be growing pressure for the Bank of Japan to consider a rate hike as early as June.

It is quite unusual for the US Treasury to directly comment on the monetary policy of Japan. So not just the FX, but the monetary policy communication comment from Bessent would be the focus today.

Japan has already spent probably around 10 trillion yen, which is very close to the amount spent in April and May 2024. There is still a chance for an additional round of intervention if USD/JPY approaches 160 again. In this round, it hasn't breached 155. Based on CFTC data, positioning is still skewed toward yen short positions, so the position covering is not complete yet. If we hit 160, there could be additional unwinding in yen short positioning, which could accelerate yen weakness, prompting another round of intervention.

The commitment to support the Japanese yen from Japanese authorities is quite strong. So I think there is a good chance for additional intervention as the yen approaches 160.

The Ishiba administration may not want the BOJ to rush for tightening, given the situation in the Middle East and elevated oil prices. In this regard, Bessent's meeting with the Prime Minister is important. Any communication or discussion about monetary policy there could be potentially important to monitor. Also, the BOJ is supposed to be independent. We need to monitor the summary of opinions from the April meeting. If neutral board members like Adachi and Takada suggest they are comfortable with a rate hike in June, then not three but five board members will be voting for a rate hike, which would be a critical majority.

Those neutral board members are scheduled to speak this week and next week. Their independent communication is also worth monitoring to gauge the risk or chance of a rate hike in June.

It heavily depends on the situation in the Middle East. If we assume some stabilization, we believe the dollar is likely to weaken towards the end of the year because uncertainty regarding US economic and trade policy will be even higher after the US attack on Iran. The dollar will be weak not just against the yen, but against the euro and Chinese renminbi as well. Based on that, and gradual rate hikes from the BOJ, dollar-yen should decline to about 152-153 by the end of the year.

Fixed income flows from Japan, investment in US bonds, have been gradually weakening since early 2025. There has been some shift away from US bonds to other bond markets like Europe and Australia. This is adding some pressure on the US bond market. What we are crucially monitoring is whether Japanese investors will accelerate their repatriation back into JGBs. So far, we haven't observed a very clear signal yet, but clearly the JGB yield is much more attractive now for domestic investors. If the market is confident about stabilization in Japan's inflation at 2%, Japanese investors will start repatriation more aggressively, which would support the Japanese market while the US dollar may weaken.

Clear communication from the BOJ to avoid a 'behind the curve' scenario is quite important for the investment attitude.