USD/JPY trades with modest losses but the downside seems limited. Economists at Credit Agricole CIB Research believe the pair is still undervalued as it should trade around the 117.50 level.

Higher US-T yields and a steepening UST curve imply the USD should be stronger

“While higher UST yields and a steepening UST curve imply the USD should also be stronger, it continues to struggle even against the JPY. Indeed, USD/JPY is judged as undervalued relative to its short-term fundamentals and should be trading around 117.50."

“10Y JGB yields are trading above 0.20% and near the top of the BoJ's tolerance band for the yield's deviation from the central bank's 0% target. Some of the rise in JGB yields is due to the rise in global yields in general, but is also in part due to the market pricing in some chance of the BoJ adjusting its YCC and moving in 10Y JGB target to a shorter tenor such as the 5Y JGB yield."

See: USD/JPY to soar towards 120 on US T-bond yields rising above the key 2% mark – SocGen