MUFG Research sees a scope for USD/JPY to decline in the near-term on the recent correction lower in yield.
"At the current juncture, we are more inclined to view the recent correction lower in yields as temporary although the loss of upward momentum is encouraging and suggests that financial markets are now better priced for the improving global growth outlook. It could help to reduce the risk of another disruptive taper tantrum event," MUFG notes.
"As we have highlighted before, USD/JPY has been the most sensitive G10 currency pair to rising US yields. The loss of upward momentum for yields will make it harder for USD/JPY to sustain levels above 110.00 and could eventually trigger a deeper correction lower," MUFG adds.