The HSBC report discusses the recent strengthening of the Yen against the US Dollar, which follows a surge in Japanese long-dated bond yields. Speculation of government intervention, combined with ongoing US Dollar weakness and Japanese fiscal stimulus, suggests that 2026 could be the 'year of the Yen'. The report highlights the potential impact on carry trades and warns investors to be cautious of Japanese market volatility.

Yen shows potential for further strength

"Last week’s strengthening of the yen versus the US dollar comes hot on the heels of a surge in Japanese long-dated bond yields. The moves could just be bumps in the road towards BoJ policy normalisation."

"But speculation of government intervention, combined with ongoing US dollar weakness, Fed easing, Japanese fiscal stimulus, and associated inflationary pressures could mean 2026 is finally the 'year of the yen'."

"Nonetheless, it’s a reminder that global investors should be wary of the impact of Japanese market volatility."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)