Nikkei 225 Tumbles 3% as USDJPY Reverses on Yield Spike

The Nikkei 225 has plummeted 3% in today's session as rising Japanese government bond yields trigger a sharp reversal in USDJPY, which fell 0.8% to test support near 154.20. The spike in JGB yields reflects growing speculation about potential Bank of Japan policy normalization, with 10-year yields reaching multi-month highs. This development has prompted significant yen short-covering, pressuring the dollar-yen pair from recent highs above 156.00. Japanese equities are bearing the brunt of the currency strength, with exporters particularly hard hit given their sensitivity to yen appreciation. Technical indicators suggest USDJPY has broken below its ascending trendline, opening the path for a deeper correction toward 152.50. The correlation between rising yields and yen strength marks a significant shift in market dynamics, suggesting traders are repositioning for a potential BoJ policy pivot in coming months.