USD/JPY saw a sharp reversal from its New York session high of 158.09, driven by renewed verbal intervention from Japan’s Finance Minister Kato, which underscored the government's commitment to monitoring yen weakness. During Asian trading, the pair eased to a range between 157.96 and 157.51 but held firm near July levels, reflecting underlying bullish sentiment supported by robust US yields and stable JGB rates. The interest rate differential between US Treasuries and Japanese government bonds remains at recent highs, providing a structural tailwind for USD/JPY.

Option expiries at 158.00 worth $721 million are likely to constrain upward moves temporarily, but the broader trend suggests room for further appreciation. Japan’s recent economic data provide a case for a potential BOJ policy shift, but internal disagreements within the Policy Board make a rate hike in January uncertain. With year-end positioning largely concluded for Japan Inc., Tokyo markets are effectively on pause until early January, potentially reducing immediate volatility in yen pairs.

JPY crosses also faced selling pressure following their recent rallies. EUR/JPY, which hit a two-month high of 164.75 in New York, retreated to trade between 164.64 and 164.11. GBP/JPY slid from 197.90 to 197.15, unable to reclaim its December peak of 198.94. Meanwhile, AUD/JPY weakened from 100.68 to 97.99, flirting with the base of its daily Ichimoku cloud, signaling caution among traders. The outlook for JPY crosses remains mixed, with near-term consolidation likely amid limited catalysts.