FX alert: Ain’t nothing going on but Yen going on

The Takaichi trade has turned into a full-blown reflation stampede — a market repricing so fast and furious it left half the Tokyo desk tripping over their own stop-losses. The opening bell in Asia was less a calm start and more a fire drill — traders scrambling to double up reverse, or get flat before the next shoe dropped. USD/JPY gapped the exact two big figures we’d called for over the weekend, then rode a clean momentum arc straight toward and through 150, a level that still feels like both magnet and tripwire rolled into one.

This wasn’t a “quiet Monday” — it was a full reawakening of Japan’s yield narrative under a new Iron Lady who seems content to keep the fiscal spigots open. The market heard “Takaichi” and instantly translated it to “reflation.” Bond traders knew what was coming: steeper curves, heavier issuance, a little more political steel behind the policy lever. In FX, that meant one thing — yen weakness, the path of least resistance.

By midmorning in Singapore, the air was thick with the scent of short gamma and reloaded USDJPY longs. The BoJ, conspicuously silent, left traders to their own devices — and in that vacuum, the trade ran. Unless Governor Ueda pops up with a jawboning remark or a stealth operation, London will likely inherit a strong USDJPY bid. The rhythm is familiar: momentum through Europe and New York mornings, but a profit-taking driven fade into the New York afternoon.

Today’s theme is as simple as it gets: “Ain’t nothing going on but yen going on.”

Outside Tokyo’s burst of adrenaline, volatility remains subdued. Three-month EUR/USD vol sits at 6.60%, its lowest since last November — a market in deep sleep. Even so, risk reversals still tilt 0.5% in favor of euro calls, suggesting traders haven’t fully abandoned upside bets; they’ve just dialed down expectations for speed or surprise.

The euro itself is trapped in a holding pattern — 1.1700–1.1750, a narrow corridor where liquidity hums but conviction hides. Energy prices are inching higher, which doesn’t exactly flatter the eurozone’s terms of trade, but the algos can’t resist the carry on EUR/JPY(175.91 ( +1.6 %) when equities flash green. That cross, too, has become a silent barometer for how far the Takaichi effect travels beyond Japan’s shores and will.

Beneath the surface, a paradox brews. U.S. data are printing far firmer than the market narrative implies — stronger consumption, resilient employment, and early signs that the tariff shock might remain a one-off. Goldman warned of a “re-acceleration risk,” and now UBS has joined the choir, noting that if inflation undershoots and capex expands beyond the AI bubble, America might start to hum again. That, in turn, keeps the dollar from falling off the cliff on real yield differentials as traders chase reflation in Tokyo.

In that sense, this is a tale of two trades — Japan’s reflation and America’s re-acceleration — both whispering the same message in different dialects: the soft landing isn’t dead yet.

But for today, the spotlight belongs to Tokyo. The market has rediscovered its muse in the yen, and unless the BoJ decides otherwise, traders will keep dancing to the same tune — one that starts loud at dawn and fades gently with the New York afternoon sun.