Bessent Predicts Stronger Yen as US Bond Selloff Accelerates

The US bond market is experiencing an accelerating selloff, pushing Treasury yields to their highest levels since early 2025. The 10-year yield has climbed to approximately 4.78%, driven by geopolitical tensions in the Middle East and renewed military exchanges between the US and Iran.

Treasury Secretary Scott Bessent believes that the Japanese government and the Bank of Japan will take actions to strengthen the yen, which is trading dangerously close to 160 per dollar. He noted that markets are already pricing in a BOJ interest rate hike, with analysts forecasting three hikes over the coming year.

The interconnection between Japanese and US bond markets is a critical dimension of this story. Washington's concern is that a continued selloff in the yen and Japanese government bonds could force unwinding of leveraged positions, potentially spilling over into US Treasuries at a time when American borrowing costs are already under intense pressure.

Bessent urged the BOJ to raise interest rates and pressed Japan to demonstrate fiscal sustainability. He signaled that the era of Abenomics-style massive stimulus should be considered over, indicating that recent yen moves were not disorderly enough to warrant another joint foray into currency markets.