USD/JPY rockets 150 points higher as JGB yields surge
BOJ Ueda says policy still accommodative, will adjust if underlying prices riseOPEC+ is expected to once again postpone it production hikeUK asset manager ABRDN in talks with China Citic to form Joint VentureBoJUeda says hike to 50bp interest rates will boost interest payments on reserves 1tln yenJapan Prime Minister Ishiba has strong concerns that rising yields may harm financesBOJ Governor Ueda warns loss of mkt confidence in Japan fiscal could drive JGB yields upUSD/JPY volatility persists - it rose around 150 points from its earlier session lowMore on Japan’s finance minister warning of fiscal strain as bond yields hit 15-year highJapan's Core Inflation Hits 19-Month High, Strengthening Expectations for BOJ Rate HikesMore from BOJ's Ueda - Ready to respond to abnormal market movesBank of Japan Governor Ueda sees the bright side of higher interest ratesRBNZ Chief Economist Conway - OCR forecasts indicate another 75bp easingPBOC sets USD/ CNY reference rate for today at 7.1696 (vs. estimate at 7.2433)Japanese Industry and Trade Minister Muto will head to the US to talk tariffsJapan Jibun February preliminary manufacturing PMI 48.9 (prior 48.7)Chinese financial media says PBOC LPRs have room to fall furtherJapan finance minister Kato - higher long term rates can pressure Japan's fiscal situationRBA Bullock says did not want to be late to easingJapan January Core CPI 3.2% y/y vs. 3.1% expectedFed's Kugler says watching labour market layoffs like a hawkReserve Bank of Australia Governor Bullock says might be more rate cuts, caution requiredUkraine President Zelenskyy says meeting with US' General Kellogg 'restores hope'Fed's Kugler says will have to wait to assess the inflation impact of tariffsRBA Gov Bullock says the Bank aiming for the mid-point of the 2-3% inflation target bandRBA Gov Bullock wary that cutting rates too quickly could lead to inflation above midpointPimco cautious on Australia semi-govmt debt, concerns mount about states fiscal healthFT front page headline says US opposes language on 'Russian aggression' in UkraineFed's Kugler says she thinks the Fed should not cut interest rates again for some timeForexlive Americas FX news wrap 20 Feb. The USD moves lower. USDJPY falls to new 2025 low.Australian Preliminary Manufacturing PMI for February 50.6 (prior 50.2)Fed's Kugler says Fed Funds rate is moderately restrictiveNew Zealand January trade balance a deficit of 486bn NZD (prior 94mn surplus)ICYMI former BOJ Sakurai hawkish comments: Could be a May hike, sees 1.5% by end FY 2026Trade ideas thread - Friday, 21 February, insightful charts, technical analysis, ideasUSD/JPY extended its decline leading into Japan’s inflation data release today, but in a surprising turn, the pair rebounded sharply despite figures that reinforced expectations of continued Bank of Japan (BOJ) rate hikes. The inflation data showed: Core inflation (excluding fresh food): 3.2% y/y, a 19-month high. Core-core inflation (excluding food and energy): 2.5% y/y. Headline inflation: 4.0% y/y. On the surface, this data supported the case for the BOJ to stay on its tightening path. However, after initially sliding, USD/JPY found a bottom and began to climb—a move that initially looked like a classic “buy the fact” reaction (a sharp sell-off ahead of the data, followed by a rebound once it was confirmed). But instead of stabilizing, the rally kept extending. As this was unfolding, Japanese government bond (JGB) yields surged. The 10-year benchmark yield hit 1.455%, its highest level since 2009, while the 2-year yield climbed to its highest level since October 2008. These moves triggered official pushback, with policymakers attempting to talk yields down: Finance Minister Katsunobu Kato warned that rising bond yields could strain Japan’s finances due to increased debt-servicing costs. Prime Minister Shigeru Ishiba echoed similar concerns about the burden of higher yields. BOJ Governor Kazuo Ueda signaled potential bond market intervention, stating: “We will purchase government bonds nimbly to foster the stable formation of yields in exceptional cases where long-term yields rise sharply.” Concerns over Japan’s rising debt burden fuelled yen weakness, sending USD/JPY surging from just under 149.30 to above 150.70 at its peak. Ueda’s comments on intervention helped cap JGB yields, which edged lower afterward, allowing USD/JPY to pull back slightly to around 150.20 as of the latest update. If an Asia market Wrap has a "Key Takeaway" today's is that despite strong inflation data pointing toward further BOJ rate hikes, the combination of rising bond yields and government intervention threats shifted the market's focus. Instead of reinforcing yen strength, concerns over Japan’s fiscal strain and potential BOJ bond-buying led to renewed yen selling, fueling a sharp USD/JPY rally.***While Japan’s bond market drama dominated the session, there were also remarks from Federal Reserve Governor Adriana Kugler and Reserve Bank of Australia
- BOJ Ueda says policy still accommodative, will adjust if underlying prices rise
- OPEC+ is expected to once again postpone it production hike
- UK asset manager ABRDN in talks with China Citic to form Joint Venture
- BoJUeda says hike to 50bp interest rates will boost interest payments on reserves 1tln yen
- Japan Prime Minister Ishiba has strong concerns that rising yields may harm finances
- BOJ Governor Ueda warns loss of mkt confidence in Japan fiscal could drive JGB yields up
- USD/JPY volatility persists - it rose around 150 points from its earlier session low
- More on Japan’s finance minister warning of fiscal strain as bond yields hit 15-year high
- Japan's Core Inflation Hits 19-Month High, Strengthening Expectations for BOJ Rate Hikes
- More from BOJ's Ueda - Ready to respond to abnormal market moves
- Bank of Japan Governor Ueda sees the bright side of higher interest rates
- RBNZ Chief Economist Conway - OCR forecasts indicate another 75bp easing
- PBOC sets USD/ CNY reference rate for today at 7.1696 (vs. estimate at 7.2433)
- Japanese Industry and Trade Minister Muto will head to the US to talk tariffs
- Japan Jibun February preliminary manufacturing PMI 48.9 (prior 48.7)
- Chinese financial media says PBOC LPRs have room to fall further
- Japan finance minister Kato - higher long term rates can pressure Japan's fiscal situation
- RBA Bullock says did not want to be late to easing
- Japan January Core CPI 3.2% y/y vs. 3.1% expected
- Fed's Kugler says watching labour market layoffs like a hawk
- Reserve Bank of Australia Governor Bullock says might be more rate cuts, caution required
- Ukraine President Zelenskyy says meeting with US' General Kellogg 'restores hope'
- Fed's Kugler says will have to wait to assess the inflation impact of tariffs
- RBA Gov Bullock says the Bank aiming for the mid-point of the 2-3% inflation target band
- RBA Gov Bullock wary that cutting rates too quickly could lead to inflation above midpoint
- Pimco cautious on Australia semi-govmt debt, concerns mount about states fiscal health
- FT front page headline says US opposes language on 'Russian aggression' in Ukraine
- Fed's Kugler says she thinks the Fed should not cut interest rates again for some time
- Forexlive Americas FX news wrap 20 Feb. The USD moves lower. USDJPY falls to new 2025 low.
- Australian Preliminary Manufacturing PMI for February 50.6 (prior 50.2)
- Fed's Kugler says Fed Funds rate is moderately restrictive
- New Zealand January trade balance a deficit of 486bn NZD (prior 94mn surplus)
- ICYMI former BOJ Sakurai hawkish comments: Could be a May hike, sees 1.5% by end FY 2026
- Trade ideas thread - Friday, 21 February, insightful charts, technical analysis, ideas
USD/JPY extended its decline leading into Japan’s inflation data release today, but in a surprising turn, the pair rebounded sharply despite figures that reinforced expectations of continued Bank of Japan (BOJ) rate hikes.
The inflation data showed:
- Core inflation (excluding fresh food): 3.2% y/y, a 19-month high.
- Core-core inflation (excluding food and energy): 2.5% y/y.
- Headline inflation: 4.0% y/y.
On the surface, this data supported the case for the BOJ to stay on its tightening path. However, after initially sliding, USD/JPY found a bottom and began to climb—a move that initially looked like a classic “buy the fact” reaction (a sharp sell-off ahead of the data, followed by a rebound once it was confirmed). But instead of stabilizing, the rally kept extending.
As this was unfolding, Japanese government bond (JGB) yields surged. The 10-year benchmark yield hit 1.455%, its highest level since 2009, while the 2-year yield climbed to its highest level since October 2008. These moves triggered official pushback, with policymakers attempting to talk yields down:
- Finance Minister Katsunobu Kato warned that rising bond yields could strain Japan’s finances due to increased debt-servicing costs.
- Prime Minister Shigeru Ishiba echoed similar concerns about the burden of higher yields.
- BOJ Governor Kazuo Ueda signaled potential bond market intervention, stating: “We will purchase government bonds nimbly to foster the stable formation of yields in exceptional cases where long-term yields rise sharply.”
Concerns over Japan’s rising debt burden fuelled yen weakness, sending USD/JPY surging from just under 149.30 to above 150.70 at its peak. Ueda’s comments on intervention helped cap JGB yields, which edged lower afterward, allowing USD/JPY to pull back slightly to around 150.20 as of the latest update.
If an Asia market Wrap has a "Key Takeaway" today's is that despite strong inflation data pointing toward further BOJ rate hikes, the combination of rising bond yields and government intervention threats shifted the market's focus. Instead of reinforcing yen strength, concerns over Japan’s fiscal strain and potential BOJ bond-buying led to renewed yen selling, fueling a sharp USD/JPY rally.
***
While Japan’s bond market drama dominated the session, there were also remarks from Federal Reserve Governor Adriana Kugler and Reserve Bank of Australia (RBA) Governor Michelle Bullock, both striking a cautious tone on monetary policy.
- Kugler reinforced the Fed’s “wait and see” stance, emphasizing the need to assess factors such as the impact of tariffs and labor market conditions before making further policy decisions.
- Meanwhile, Bullock provided no clear signals on the timing of potential rate cuts in Australia, if any, maintaining a measured outlook.
