Japan's 10-year government bond yield pushed above 3% on Tuesday, its highest level since 1996, after U.S. Treasury Secretary Scott Bessent said he expects Tokyo and the Bank of Japan to act on the falling yen. USD/JPY held near the 160 mark for a third straight session, keeping intervention risk in focus as traders await this month's BOJ decision.
The yen was last trading at 160.1 per dollar as Japan's borrowing costs rose to their highest level in three decades, deepening the standoff between Tokyo and Washington over the currency's slide.
Bond yields jump as Bessent piles on pressure
Japan's benchmark 10-year yield rose 6 basis points on Tuesday to nudge above 3% for the first time since 1996. The move tracked a broader selloff in global bonds, with U.S. Treasury yields also climbing after Federal Reserve Chair Kevin Warsh's Jackson Hole remarks were read as hawkish.
Breaching 160 raises the odds of currency intervention in the view of some traders. The U.S. and Japan conducted a rare joint intervention to support the currency in late July, but the yen has since surrendered much of those gains.
Bessent says Japan will act to strengthen the yen
Bessent told CNBC: "I have information that the market doesn't have." He added that it is his belief the Japanese government and the BOJ will take steps leading to a stronger yen. A U.S. official told NHK that Bessent emphasized the need for Japan to communicate its path toward fiscal sustainability and pursue rate hikes as well, in separate meetings with Japanese Finance Minister Satsuki Katayama and BOJ Governor Kazuo Ueda.
Katayama told reporters that the U.S. and Japan had agreed to keep coordinating for "orderly" moves in the yen and remained ready to act against "disorderly" market swings, according to Reuters.
USD/JPY tests 160 for a third session
USD/JPY pushed to test levels above 160 again on Tuesday, even after Bessent's comments, as traders digested the broader bond selloff spilling into Treasuries. The pair had earlier closed the prior session at 159.96, just below the 160 threshold, after weakening past it in the two sessions before that.
Markets are pricing a 73% chance of a Bank of Japan rate hike later this month, though analysts say the central bank would need stronger follow-through to give the currency lasting support. Japan Macro Advisors' Takuji Okubo told CNBC that Tuesday's higher borrowing costs reflect a rising chance of a September BOJ hike and the market perhaps adjusting its expected terminal rate from 1.5% to 1.75% or higher, up from a current benchmark rate of 1%.
Okubo called the 3% yield high by historical standards but said it marks another step for Japan in leaving deflation behind and reaching the 2% inflation levels common elsewhere.
Sources: CNBC, InvestingLive, Investing.com
Trading involves risk.
Risk Disclaimer
