Yen Under Siege as US-Japan Yield Differentials Widen

The Japanese yen remains under pressure due to significant yield differentials between US and Japanese two-year government bond yields, currently standing at around 2.81 percentage points.

This spread is driving carry trades, where investors borrow in low-yielding yen to invest in higher-yielding US assets.

The Bank of Japan's (BoJ) expected tightening has strengthened expectations that policymakers are not finished with policy normalization.

Economists now expect the BoJ to raise interest rates again during the second half of the year, with the policy rate projected to reach around 1.25% by December.