Danske Research discusses USD/JPY outlook and maintains a structural bearish bias targeting a move towards 125 and expressing tis view via options.

"Two strong opposing forces decide the short-term expectation of USD/JPY leaving a wide outcome space of anywhere from 125 to 140. Rising global bond yields have started to push USD/JPY higher again, but Kazuo Ueda taking office on 8 April and renewed speculation of monetary tightening in Japan could pull the pair lower," Danske notes. 

"Which effect will dominate over the coming months? We think the latter and we expect the BOJ monetary tightening to be in the cards in Q2. That includes an exit from negative interest rates and allowing the 10Y yield to rise to 1%. It takes USD/JPY to 125 in our view. As for the former effect. It dominates now and pushed USD/JPY to 134, but the US 10Y yield peaked last year and we think this effect fades as the US hiking cycle soon ends.

If we are wrong and the 10Y US yield rises towards last year's top, USD/JPY could see 140 again. We are still short USD/JPY via options in our FX Top Trades," Danske adds.