The strength of the US dollar is again a problem for the Bank of Japan (Boxwood). The head of the country’s monetary policy noted on Wednesday that the ten-year Japanese sovereign bond was above 1% yield, a level not seen since July this year. The Republican victory in the United States and the arrival of Donald Trump are partly responsible, even if Japan also has its own problems.
The last time this bond was quoted at current levels in the secondary market, there was a market scare due to the effect of the to trade and the change in strategy of investors who seek cheap financing by taking advantage of the differential between interest rates of the main central banks. At that time, the dollar was trading for more than 155 yen, a breakthrough that also occurred this week.
The market anticipates that the BoJ will be forced to raise its reference rates by another 10 basis points at the December meeting, according to Bloombergin his efforts to avoid the collapse of your currency. There would then be two other similar increases until May 2025, where we would reach a rate of 0.55% not seen since September 1995. But, along the way, Japanese sovereign debt would maintain its yield on the rise, unless the BoJ continues its securities purchases. debt.
Yields on Japanese sovereign bonds have tracked those on US debt in recent weeks. And higher than expected interest rates in the United States (due to a strong dollar due to higher than expected inflation) will force the The Bank of Japan will tighten its monetary policy at a higher speed or with greater intensity. “We are currently forecasting one increase in December and, in fact, four more over the next year,” said Sonal Desai, director of fixed income at Franklin Templeton.
The Japanese sovereign debt market has been subject to interventions by the BoJ, based on bond purchases, to control profitability and prevent the depreciation of its currency. However, this did not prevent shorter-term bonds, the more sensitive to central banks when the country’s monetary policy is adjusted, they record returns not seen in decades. This is the case for the two-year Japanese bond, which displays yields close to 0.52%, the highest in December 2008.
