Why the US Is Closely Monitoring Japan's Yen and Bond Market

The United States is increasingly concerned about Japan's currency and bond market, as Japan remains the largest foreign holder of US Treasury debt. President Donald Trump discussed the yen directly with Prime Minister Sanae Takaichi last week, according to Finance Minister Satsuki Katayama. Japan has spent an estimated $167 billion this year to support the yen, partly by selling US Treasuries, which contributes to higher US bond yields. With the Bank of Japan raising its key rate to 1.25% on September 18—the highest level since 1995—rising domestic yields may encourage Japanese investors to repatriate capital, further impacting the US bond market.