OCBC strategists say persistent yen weakness and rising long-end Japanese
government bond yields make Japan a potential source of global market
volatility. Markets view the Bank of Japan as behind the curve, intensifying
downward pressure on the yen; strategists expect investors may increasingly see
any future rate hikes as driven by Prime Minister Takaichi’s policy direction
rather than economic data. Further yen depreciation could weigh on regional FX,
notably the South Korean won and Thai baht, but OCBC flags larger spillover risk
from higher long-term JGB yields — which appear to be pushing up U.S., U.K. and
German government bond yields — and warns sustained JGB yield rises could lift
global yields further.
