USD/JPY: Yen on Track for 8th Gain in a Row After Japan’s Bond Yields Hit All-Time High

Record borrowing costs for long-term debt were driving traders to the yen in hopes that more money could flow into Japan.

🚀 Eight Days’ Rally in the Works

• The USDJPY pair was trading to the downside for the eighth straight day on Thursday as the yen was busy flexing and making moves across the charts.
• The dollar-yen hit a session low of ¥143.10 early morning as traders were still digesting a dismal Tuesday auction of Japanese government bonds. The highlight? Lack of demand for Japanese debt, raising some concerns.

💪 Yen Flexes on Bond Jitters

• On Tuesday, yields on Japan’s longest-dated government bonds exploded to all-time highs. The 30-year surged to 3.14%, the 20-year soared to 2.56%, and the 40-year hit an all-time record of 3.61%.
• In yield-speak, that’s a major red flag: prices tanked as buyers stepped back. But on the flipside, the yen strengthened as investors figured this might bring some foreign demand if global investors sold their lower-yielding assets and bought some Japanese debt.

🤸🏼‍♂️ Breaking It Down

• Behind the volatility? A triple threat. First, the Bank of Japan’s tapering of bond purchases has created a vacuum in demand. Second, traders are spooked by Japan’s massive debt burden — over 200% of GDP.
• Third, US President Trump’s tariffs have thrown a wrench into the global trade machine, stoking fears of slower growth.
• Rates traders noted that Tuesday’s auction featured the largest “tail” — the gap between average and lowest accepted prices — since the 1980s. That suggests buyers were demanding steep discounts just to show up.

🌐 Zoom Out a Little

• The big picture? If Japanese investors decide to retreat from foreign assets and repatriate funds, it could have ripple effects across global markets. That fear is pushing forex traders to favor the yen — despite the domestic bond market chaos.
• For now, the dollar-yen is holding just above the critical ¥143.00 level. A break below could open the door for further yen strength, especially if risk-off flows continue and Japan’s bond market jitters keep feeding into safe-haven demand.