A detailed note from Macquarie bank on the US dollar and Japanese yen, in summary:

(bolding mine)

Bank of Japan tightening continues

  • JGB buying slows further … BOJ seems keen to let the 10y JGB yield rise towards +20bp over time
  • the recent policy decision to widen the 10y trading band looks increasingly like a rate hike that will be administered gradually over the coming months

Stealth tightening

  • USDJPY has paid little attention so far, largely because this story has unfolded so slowly
  • BoJ's skilful communication has also preserved the prevailing sense of calm, while Fed normalisation has been a helpful distraction.

Beware the cumulative effect

  • JGB yields have risen meaningfully
  • As the tightening continues from here, some mild downward pressure on USDJPY could develop

More acute issues are building too

  • Other factors like the state of global sentiment and the Fed's posture
  • Risk appetite is corroding as Fed quantitative tightening reabsorbs central bank liquidity
  • Isolated flare-ups in pockets of EM are now spreading across risk markets more general
  • AUD has already softened, but USDJPY has been remarkably docile so fa

More Fed hikes are still in the pipeline

  • has kept USDJPY propped up for now
  • But we expect an imminent shift in the tone of Fed communications
  • Sept 26th FOMC statement is likely to acknowledge that policy settings are no longer "accommodative"