Yen Breaks Past ¥160, Japanese Yields Hit 30-Year High

The Japanese yen fell through ¥160 per dollar and Japanese government bond yields climbed to their highest level in thirty years in the session after the Jackson Hole central-banking meeting, according to the Financial Times. The moves followed hawkish remarks attributed to Kevin Warsh, a candidate discussed in connection with future Federal Reserve leadership, which investors read as raising the odds of continued monetary tightening. The sell-off in both Japanese bonds and the yen matters because it reverses a long period in which Japan's ultra-low rates made the yen a funding currency for trades in other assets. Rising Japanese yields raise the cost of unwinding those trades and can force selling elsewhere. What remains unresolved is whether the Bank of Japan will respond directly to the currency weakness or the yield rise, and how much further Warsh's remarks will move actual Fed policy expectations rather than just market pricing.