I wrote about the main factors driving USD/JPY higher earlier but the move has now extended to 200 pips, including about 80 since the ADP data.
Treasury yields are up 3-6 bps across the curve and some are saying that's because of diminishing fears of Middle East war. I'm not so sure that's the case. I think what the bond market is looking at is oil and the possibility that a war spikes the oil price at a time of US and China stimulus.
That could upend the fear trade are re-stoke inflation.
I think that's still a small part of the picture in USD/JPY as it's more about the Fed and Japanese domestic factors but it's certainly a risk to ponder. Also note that new PM Ishiba said Japan is not in an environment for an additional rate hike after meeting with the BOJ.
"I do not believe that we are in an environment that would require us to raise interest rates further," Ishiba told reporters.
The BOJ's Ueda said they would hike rates if economic developments unfold as forecast.
Note that USD/JPY is now higher than before the LDP picked a new leader.