06:41 AM EDT, 06/10/2025 (MT Newswires) -- The yen (JPY) has been one of the more volatile currencies overnight Monday, said MUFG.

USD/JPY briefly rose to an intra-day high of 145.29 before dropping back towards 144.50, wrote the bank in a note to clients. The yen initially weakened on the back of comments from Bank of Japan Governor Kazuo Ueda, who was speaking before parliament.

The yen weakened after Governor Ueda stated that there was still some distance for the price trend to rise to its, target of 2.0% which initially dampened expectations for further BoJ rate hikes, stated MUFG. However, Ueda went on to reiterate that if the price trend becomes more certain, then the BoJ will raise rates further.

The comments indicate that the BoJ remains cautious over raising rates further amidst the "extremely" high uncertainties surrounding the outlook for the economy. The bank isn't expecting the BoJ to provide a stronger signal over rate hikes at next week's policy meeting, even though recent inflation data has been stronger.

The BoJ is in no rush to hike rates further and can wait to see how trade talks play out between the United States and Japan ahead of the July 9 deadline for higher "reciprocal" tariffs. Japan's Economic Revitalization Minister Ryosei Akazawa stated overnight that the trade negotiations with the U.S. are still in a fog.

The comment supports MUFG's expectations that the main policy change at next week's BoJ policy meeting will be updated plans for tapering. It has been reported that the BoJ is considering slowing the pace of tapering for the next fiscal year. The BoJ is currently slowing monthly Japanese government bond purchases by 400 billion yen every quarter.

The pace of tapering could slow to between 200 billion-400 billion yen from April next year. Market expectations for slower tapering could already be encouraging yen selling and helping to dampen upward pressure on long-term JGB yields, pointed out the bank.

At the same time, market attention is also focused on trade talks between the U.S. and China taking place in London at the start of this week. The trade talks will continue into a second day, according to a U.S. official. President Donald Trump told reporters at the White House on Monday that "we are doing well with China. China's not easy and that "I'm only getting good reports."

The comments have encouraged building investor optimism that a trade deal/agreement can be reached in the coming months to avoid the higher "reciprocal" tariffs being re-imposed on trade between the U.S. and China, added the bank.

According to a Bloomberg report, the U.S. has signalled a willingness to remove restrictions on some tech exports in exchange for assurances that China is easing limits on rare earth shipments. Head of the White House's National Economic Council Kevin Hassett did add, though, that they would stop short of removing restrictions on the most sophisticated H20 chips made by Nvidia.

The talks are taking place amidst growing evidence of the economic disruption from the tariff war. The latest trade report from China released Monday revealed that exports to the U.S. declined by almost 20% in May, which was the largest monthly drop since the start of COVID.

The developments have had limited impact on the renminbi, according to MUFG. USD/CNY continues to trade just below the 7.2000 level and is trading close to year-to-date lows.