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Japanese Yen weakens as 10-year bond yield hits 3% for first time since 1996

  • USD/JPY gains ground to near 159.85 in Tuesday’s early European session. 
  • Japan’s 10-Year bond yield reaches 3% for the first time since 1996. 
  • Bessent expects the BoJ to take action to boost the Japanese Yen.  

The USD/JPY pair edges higher to around 159.85 during the early European trading hours on Tuesday. Japan’s 10-Year bond yield hit 3% for the first time in three decades after US Treasury Secretary Scott Bessent signaled that the United States (US) wants the Bank of Japan (BoJ) to raise interest rates more aggressively.

Bessent said on Tuesday he believes the Japanese government and central bank will take action that leads to a stronger Japanese Yen (JPY), per CNBC. However, the JPY remains weak against the US Dollar (USD) despite Bessent’s comments. 

Japanese Finance Minister Satsuki Katayama said that she met with Bessent and agreed that orderly JPY movement is critical for global market stability. The US and Japan also confirmed that continued and cooperative measures would contribute to this common goal. 

Yen focus stays on BoJ as US officials urge Ueda to ‘do the right thing’

Strategists at Scotiabank note that the “outlook for relative central bank policy remains front and center into the BoJ’s September 18 decision,” with attention increasingly drawn to international commentary on the Bank of Japan’s next move. They highlight media reports that US Secretary Bessent expects Governor Ueda “to do the right thing,” underscoring the external pressure surrounding the meeting. Scotiabank also points out that Board member Takata is scheduled to speak later this week, an appearance that could help shape expectations ahead of the September policy decision.

Chart Analysis USD/JPY

Technical Analysis: USD/JPY remains capped under the 100-day SMA

In the daily chart, USD/JPY holds a capped tone as it sits under the 100-day moving average (MA) and the upper Bollinger band. Price remains above the 20-day Bollinger middle band, suggesting underlying demand, while the Relative Strength Index (RSI) at 50.75 leans slightly positive but does not yet point to strong directional conviction.

On the topside, immediate resistance is located at the 100-day MA at 160.00, followed by the upper Bollinger band around 160.35, where renewed selling pressure could emerge. On the downside, initial support aligns with the 20-day Bollinger middle band at 159.15, ahead of a deeper cushion at the lower Bollinger band near 157.90, where buyers would be expected to defend the broader uptrend.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Japanese Yen FAQs

The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.

Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.

The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.

Author

Lallalit Srijandorn

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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