BNY’s Head of Markets Macro Strategy Bob Savage highlights how falling JGB yields and stronger demand at Japan’s 5-year auction are reshaping views on fiscal dominance and FX risk, with the Japanese Yen appreciating since the February 8 election. He notes equity selling as profit-taking and stresses that JPY 150 in USD/JPY is the next key support level investors are monitoring.

JPY 150 is the next key level

"The focus on rates globally as a brake to unfettered equity buying has been a key part of trading in 2026. The role of bond rallies in offsetting equity selling has been less powerful. However, the moves in JGB yields over the last week suggest a changing attitude."

"What is different today is that demand for 5y JGBs rose to 3.10 bid/cover in the latest sale – the first time that demand has risen since September. The February 8 election has changed how investors think about fiscal dominance and FX risks. Since the vote, the yield curve has flattened and JPY has appreciated."

"Key to trading all risk across markets in 2026 is how much hedging from home and abroad is going on to offset stock flows, with JPY gains reflecting some of the equity unwind, while domestic interest in owning bonds is keeping money at home. JPY 150 is the next key level that investors are watching for USD support and perhaps a limit to the seesawing in equity and bond price action."

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