FYI, you should have a firewall rule at the top of your policy to always allow Loopback traffic. In this case, you'll have to use rules for non-standard Loopback traffic (non-127.0.0.1). Loopback traffic typically cannot be allowed in Location Aware Groups (especially with Connection Isolation enabled), since HIPS treats loopback traffic through a separate adapter than your Wired/Wireless network adapter. The Loopback adapter will not list DNS Servers, Connection-specific DNS suffixes, Gateway, etc.
KB71230 - Host Intrusion Prevention 8.0 Loopback traffic blocked when firewall is enabled
That did the job !
It seems obvious now but we had an SR open too, this was really perplexing everyone.
I simply added a rule directly below the Loopback rule to allow non standard local addresses 127.0.0.x and 127.0.1.x and the JUniper software now passes traffic via HIPS.
It looks like Juniper clients add another addess into the process inbetween localhost and the adapter. 127.0.0.1>Juniper Client IP>Network Adapter (I think)