Japan’s bonds and yen under pressure after Kevin Warsh’s Jackson Hole speech

{"text":[[{"start":10.72,"text":"Japan’s currency and bonds came under pressure on Monday as investors increased bets that the US and Japan would raise interest rates following this weekend’s meeting of central bankers at Jackson Hole."}],[{"start":22.6,"text":"The yen briefly weakened past ¥160 a dollar, while yields on short-dated and 10-year Japanese government bonds rose to their highest levels in more than three decades."}],[{"start":33.76,"text":"The moves came after Federal Reserve chair Kevin Warsh struck a hawkish tone in his first appearance at the Jackson Hole gathering of economists and central bankers."}],[{"start":43.76,"text":"Warsh said in a speech on Friday that “concerning” inflation figures meant “the Fed’s predominant focus right now should be on prices”, suggesting a potential rate increase at next month’s monetary policy meeting."}],[{"start":56.24,"text":"“The front-end sell-off and curve flattening are being driven by a combination of the post-Jackson Hole repricing in US rates and growing confidence that the Bank of Japan could hike as early as September,” said Masahiko Loo, senior fixed-income strategist at State Street in Tokyo."}],[{"start":73.54,"text":"The yen’s level has been closely watched since authorities in Tokyo spent a record $96.5bn in July and August to defend the currency in co-operation with Washington. It has lost more than half of the gains it made after the intervention."}],[{"start":89.52,"text":"Yields on two-year JGBs rose as much as 0.02 percentage points to 1.72 per cent, their highest level since May 1995. Yields on 10-year JGBs briefly touched 2.95 per cent, a level hit earlier this month that marked the highest since 1996."}],[{"start":null,"text":"

"}],[{"start":108.08,"text":"The market now places the probability of the BoJ raising interest rates next month at more than 90 per cent. Traders said persistent inflation and pressure on the central bank to help support the yen had significantly accelerated its rate-rise plan."}],[{"start":123.02,"text":"Traders in Tokyo anticipated continued downward pressure on the yen because of rising market confidence in the prospect of a Fed rate increase."}],[{"start":131.09,"text":"US economic data, including non-farm payrolls this week and inflation next week, could reinforce that notion and strengthen the dollar, said analysts, while a meeting of G20 finance ministers this week could bolster the idea that the US strongly favours an early rate rise by the BoJ."}],[{"start":null,"text":""}],[{"start":148.793,"text":"US Treasury secretary Scott Bessent told Reuters on Sunday that recent moves in the yen had been “pretty well contained” and he expected BoJ governor Kazuo Ueda would “do the right thing”."}],[{"start":160.24,"text":"Yujiro Goto, chief foreign exchange strategist at Nomura, said Bessent’s remarks showed the Treasury secretary favoured the BoJ raising rates to support the yen over direct intervention in the market."}],[{"start":172.12,"text":"Goto added that other comments made by Bessent at the weekend, including that the Japanese government’s decades-long reflationary policies had run their course, were likely intended to send a message to Prime Minister Sanae Takaichi that the US preferred the BoJ to raise rates."}],[{"start":188,"text":"Higher JGB yields should, in theory, draw more money to Japan and strengthen its currency, but the investor rotation into yen assets has yet to occur, said Abbas Keshvani, Asia macro strategist at RBC Capital Markets."}],[{"start":201.92,"text":"“High yields are attractive, but if they keep moving higher that’s not going to be a very compelling investment case. What we need is a stabilisation in the bond market,” said Keshvani."}],[{"start":212.454,"text":"US Treasuries were unaffected by the pressure on Japanese assets, with yields on 10-year US Treasuries edging down slightly to 4.71 per cent."}],[{"start":226.24,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1788176695_6807.mp3"}