07:06 AM EDT, 05/14/2025 (MT Newswires) -- In the period following the reciprocal tariff announcements on April 2 through to the low-point for the US dollar (USD) , the yen (JPY) was close to the top-performing G10 currency along with the euro (EUR) with only the Swiss franc (CHF) outperforming -- the yen gained by about 6% over the period April 2 through to April 21, said MUFG.

Since that low-point, the yen has given back close to 5% versus the US dollar and is the worst-performing G10 currency, wrote the bank in a note to clients. This is understandable from the perspective of United States recession risks have now receded following the tariff de-escalation and the stronger payrolls at the start of May have also helped ease recession risks.

The two-year U.S. Treasury bond yield is 45bps higher from the low on May 1, the day before the payrolls report.

But monthly International Transactions in Securities data from the Japanese ministry of finance, released on Monday was revealing in highlighting another flow that looks to have helped fuel the sharp rebound in USD/JPY, stated MUFG. It looks like certain Japanese investors may have seen an opportunity for buying international securities at more opportunistic levels -- both international equities and foreign exchange.

The data for all Japanese investors revealed purchases of international equities totaling 3,272 billion yen in April -- that's a record total in a data series going back to 2001. The data series also breaks down the monthly flow by investor type and as such the bank saw that it was Japan Trusts that were the active buyers of international equities, buying 2,762 billion yen. This is an off-the-charts record total in the data series back to the start of 2005.

Japan's Trust sector -- this sector would capture GPIF flows and other pension, real money flows -- has been switching out of international equities and into international bonds, added MUFG. That may well have run its course now although again this may merely reflect opportunistic purchases given both foreign exchange and global equity moves at the start of the new fiscal year, when the likes of the GPIF may have been undertaking some rebalancing or adopting re-weightings of portfolios.

Taking the average USD/JPY for April, the buying of international equities by Japanese investors was substantial at around $25 billion. Much of the equity buying would tend to much less hedged than purchases of international bonds, poited out the bank.

Speculators could also have played a role in the scale and speed of reversal as well, noted MUFG. The widely-tracked CFTC data that combines positioning from Asset Managers and Institutional Investors along with Leveraged Funds showed a record-long, yen position of 150,000 contracts in data going back to 2007 as of last Tuesday.

That highlights the high level of conviction of yen appreciation ahead which looks to have been sharply pared back in the week since given USD/JPY has jumped around 6 big figures, according to the bank.