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By Steve Goldstein

Deutsche Bank says simultaneous move in yen and JGBs is reminiscent of sterling and gilt fall in 2022

The premierships of Sanae Takaichi, left, and Liz Truss, both have been bad for their domestic bonds and currency.

Have we seen this movie before?

The simultaneous decline in Japanese bond yields BX:TMBMKJP-30Y and its currency (USDJPY) is reminding Deutsche Bank’s head of currency research of Liz Truss’s ill-fated premiership, when sterling and U.K. gilts tumbled in value after the introduction of what’s called a mini-budget.

New Japanese Prime Minister Sanae Takaichi differs from Truss in that she wants to spend rather than cut taxes, but both plans amount to aggressive fiscal stimulus.

The U.S. dollar and U.S. Treasury bonds also fell simultaneously in April in reaction to President Donald Trump’s “Liberation Day” tariff plan, which subsequently has been reduced in scope.

“While most commentators have been focused on the recent bout of volatility in U.S. equity markets, something far more worrying is happening elsewhere in our view: the Japanese yen and bond market are collapsing together, with the dynamic sharply accelerating in recent days. The yen and 30-yr government bond have dropped by more than 5% in recent weeks, all the more remarkable given that global fixed-income markets have been rallying elsewhere,” said Deutsche Bank’s George Saravelos.

He says the issue in Japan is that inflation expectations have become unanchored.

“If domestic confidence in the government’s and Bank of Japan’s commitment to low inflation is lost, the reasons to buy JGBs disappear, and more disruptive capital flight ensues,” he says.

Saravelos said that he’ll be watching for signs of capital flight, and whether Japanese authorities give in to pressure from financial markets.

-Steve Goldstein

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  11-21-25 0523ET
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