Yen Intervention Triggers US Treasury Market Jitters

The recent yen intervention saga has sparked a link between yen pressure and US Treasuries pressure, according to ING Think. This connection may seem minor, but it's worth exploring further.

Prior JPY weakness is seen as a manifestation of tension stemming from the Bank of Japan's ultra-cautious stance and its low policy rate. The Japanese policy rate is currently 50bp below neutrality, as measured by ING Think's interest rate buffer vis-à-vis the Federal Reserve.

This tension can be eased through rate hikes, which could help stabilize the yen and alleviate long-dated Japanese government bond yields. The Bank of Japan may choose to prioritize the protection of the yen over economic growth.