Japan’s Finance Minister Shunichi Kato mentioned on Wednesday that he’ll intently monitor bond market conditions as he’s involved a couple of current spike yields in Japan.
This remark got here after two sources advised Reuters on Tuesday that Japanese officers will think about trimming issuance of super-long bonds within the wake of current sharp rises in yields for the notes. The Ministry of Finance (MOF) will decide after discussions with market individuals round mid- to late-June, the sources mentioned.
Market response
On the time of writing, the USD/JPY pair is buying and selling 0.28% decrease on the day at 143.91.
Japanese Yen FAQs
The Japanese Yen (JPY) is likely one of the world’s most traded currencies. Its worth is broadly decided by the efficiency of the Japanese economic system, however extra particularly by the Financial institution of Japan’s coverage, the differential between Japanese and US bond yields, or threat sentiment amongst merchants, amongst different elements.
One of many Financial institution of Japan’s mandates is foreign money management, so its strikes are key for the Yen. The BoJ has instantly intervened in foreign money markets typically, usually to decrease the worth of the Yen, though it refrains from doing it typically as a result of political considerations of its important buying and selling companions. The BoJ ultra-loose financial coverage between 2013 and 2024 triggered the Yen to depreciate in opposition to its important foreign money friends as a result of an rising coverage divergence between the Financial institution of Japan and different important central banks. Extra just lately, the step by step unwinding of this ultra-loose coverage has given some assist to the Yen.
During the last decade, the BoJ’s stance of sticking to ultra-loose financial coverage has led to a widening coverage divergence with different central banks, notably with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Greenback in opposition to the Japanese Yen. The BoJ determination in 2024 to step by step abandon the ultra-loose coverage, coupled with interest-rate cuts in different main central banks, is narrowing this differential.
The Japanese Yen is usually seen as a safe-haven funding. Which means that in occasions of market stress, traders usually tend to put their cash within the Japanese foreign money as a result of its supposed reliability and stability. Turbulent occasions are prone to strengthen the Yen’s worth in opposition to different currencies seen as extra dangerous to spend money on.
