USD/JPY surges as JGB yields spike on Japan fiscal concerns

USD/JPY has jumped 1.2% to 154.80, marking its sharpest daily gain in three weeks as Japanese Government Bond (JGB) yields surged amid growing fiscal sustainability concerns. The 10-year JGB yield climbed to 1.08%, its highest level since May, reflecting investor anxiety over Japan's mounting debt burden and potential policy shifts. The yen's weakness has been exacerbated by the widening US-Japan yield differential, with US Treasury yields remaining elevated above 4.40%. Market participants are increasingly worried about Japan's fiscal trajectory, particularly as the government faces pressure to increase spending while managing the world's largest debt-to-GDP ratio. Technical analysis shows USD/JPY has broken above the 154.00 resistance level with conviction, opening the path toward 155.50. The Bank of Japan faces a challenging dilemma between supporting the yen and maintaining accommodative conditions for the fragile economy, suggesting continued volatility ahead.