The drop in US Treasury yields has certainly weighed on USD/JPY. But this pair has also been hyper-sensitive to expected Bank of Japan rate adjustments, ING’s FX analysts Chris Turner notes.

USD/JPY can try and build a floor in the 148.70/149.00 area

"The next input here will be tonight's release of the February Tokyo CPI. The headline number is expected to soften a little, but the ex-food and energy number is expected to drift back up to 2.0%. This could continue the momentum toward earlier BoJ rate hikes. And at ING, we think the risk of a 25bp rate hike in May is sorely under-priced at just 20%."

"This all sounds yen bullish. Yet our rate strategy team is reluctant to chase the US 10-year Treasury yield down to 4.00% and we suspect that USD/JPY can try and build a floor in the 148.70/149.00 area. Unlike last July/August, speculative positioning has not been excessively short yen – indeed speculative positioning is now getting stretched long yen."