Rising JGB Yields Pressure Yen, Limit BoJ Tightening Capacity

The Japanese yen continues to face pressure due to rising long-term government bond yields, which increase Japan's debt servicing costs and limit the Bank of Japan's ability to tighten monetary policy. Despite President Donald Trump's renewed criticism of Japan's trade surplus and his plans to raise tariffs on Japanese goods, Japan is unlikely to face direct U.S. pressure to strengthen the yen, according to former top currency diplomat Masatsugu Asakawa. Asakawa also dismissed speculation of a coordinated dollar depreciation similar to the 1985 Plaza Accord, noting that such an agreement would now require cooperation from China and Europe. The USD/JPY currency pair shows technical signs of a possible bearish reversal, with the yen drawing safe-haven demand amid geopolitical tensions and tariff concerns, potentially leading to further dollar weakness. Meanwhile, Japan's stock market showed mixed performance amid uncertainty over U.S. trade policy and cautious investor sentiment ahead of forthcoming Federal Reserve policy announcements. Overall, the yen's outlook is influenced by both domestic economic factors, such as bond yields, and external trade tensions, with no imminent expectation of significant currency interventions.