Japan’s 10-year government bond yield climbed to 2.95% on August 31, its highest level since September 1996. The yen breached the 160 level against the dollar, trading around 159.85 to 160.20, after Federal Reserve Chair Kevin Warsh’s hawkish remarks at the Jackson Hole Economic Symposium reinforced expectations of further US monetary tightening. Japan spent a record 98.7 billion dollars on currency defense interventions over the preceding month without halting the yen’s decline. Markets now price more than 55% probability of a rate hike at the September Fed meeting, which widens the interest rate differential between US and Japanese government debt and fuels capital outflows from yen-denominated assets into dollar-denominated ones.
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