Japanese Yen Weakens as Super-Long JGB Yields Fall Sharply, USD/JPY Climbs

Japanese Yen Continues to Weaken as Super-Long JGB Yields Fall Sharply; USD/JPY Jumps Toward Mid-143.00s

The Japanese Yen (JPY) extended its intraday losses on Tuesday, weakening notably against the US Dollar (USD) as trading moved into the European session. The USD/JPY pair climbed toward the mid-143.00s, fueled by a sharp drop in Japan’s super-long government bond yields and improving global risk sentiment.

Yen weakness deepened following reports that Japanese authorities may reduce issuance of super-long Japanese Government Bonds (JGBs), after a recent surge in their yields. The yield on the 30-year JGB has now fallen to its lowest level since May 8, signaling growing volatility in Japan's bond markets. This shift has triggered increased selling pressure on the Yen, typically viewed as a safe-haven currency.

Adding to the bearish tone for the Yen, optimism around global trade improved after US President Donald Trump announced a delay in implementing tariffs on European Union (EU) imports, pushing risk assets higher and reducing demand for traditional safe-havens like the JPY.

However, the downside for the Yen may not be unlimited. Japan's stronger-than-expected Services Producer Price Index (PPI) has reinforced expectations that the Bank of Japan (BoJ) could continue normalizing monetary policy, possibly with further rate hikes. This could offer medium-term support for the Yen.

On the US side, uncertainty over trade policy and the widening national deficit continue to pressure the Dollar’s broader outlook. Moreover, expectations that the Federal Reserve may opt for additional interest rate cuts later in 2025 could limit USD upside and act as a headwind for the USD/JPY pair.

Given these opposing forces, traders may wait for stronger directional signals and more clarity from upcoming macroeconomic data releases in both Japan and the US before committing to a sustained trend in USD/JPY.