IS THE BOJ’S SHIFT ENOUGH TO BOOST THE YEN? 3/3

The brief stabilization in Japanese bond markets has been shattered by the yen plunging past 160 JPY/USD, forcing the 10-year Japanese Government Bond (JGB) yield to break technical resistance and aggressively climb above 2.5%. This shift is entirely driven by a cost-push crisis and an embedded risk premium as the market prices in an expected +3.5% wholesale inflation (PPI) spike for Q3. Investors are also front-running an imminent Bank of Japan policy rate hike to 1% and a severe reduction in its monthly debt-purchase programs. Low coupons cannot offset these capital losses.