Japanese Yen Falls to Two-Week Low Amid Drop in 40-Year Bond Demand

The Japanese Yen has weakened significantly against the US Dollar, driven by a combination of factors including a US federal court blocking President Trump's proposed tariffs, a surge in global risk appetite, and concerns over Japan's government bond market. Demand for 40-year Japanese Government Bonds (JGBs) has fallen to its lowest level since November, amid a selloff in super-long debt and speculation that Japan's Ministry of Finance may reduce issuance to stabilize yields. This potential reduction in bond supply comes in response to multi-decade highs in super-long JGB yields, paralleling global trends and political pressures for fiscal stimulus ahead of upcoming elections. Despite the Bank of Japan's expected interest rate hikes contrasting with the Federal Reserve’s projected rate cuts, this divergence is limiting aggressive bearish bets on the Yen. Meanwhile, Japan's Finance Ministry and BoJ officials are closely monitoring bond market developments to assess any broader economic impact. The combination of easing safe-haven demand for the Yen and improving risk sentiment globally continues to support the US Dollar and pressure the Japanese currency.