The weakening yen may become a new risk for the US bond market

(1) Japanese Finance Minister Katayama Mayuki confirmed that Trump has directly expressed concerns about the weak yen to Japanese Prime Minister Sanae Takaichi. (2) An excessively weak yen would make Japanese exports cheaper, potentially harming American manufacturers. (3) However, the bigger risk lies in how the situation might evolve if Japan intervenes in the foreign exchange market again. (4) To support the yen, Japan may need to sell US dollars and overseas assets, including US Treasuries. (5) Meanwhile, long-term US Treasury yields are already at very high levels. (6) If Japan increases its selling of US Treasuries, bond prices could decline further, and yields might be pushed even higher. (7) Therefore, this is no longer just an exchange rate issue; a weaker yen may ultimately put more pressure on the US bond market. (8) It will be important to monitor whether Japan actually intervenes in the market, the scale and pace of US Treasury sales, and the impact this has on long-term US yields.