The Japanese yen rebounded during the Asian session, although it continues to hover near its 38-year low around the 160 per dollar mark. The depreciation of the Japanese currency reinforced concerns over another intervention by Japanese authorities. Finance Minister Shunichi Suzuki expressed concern over the yen’s weakness and suggested readiness for intervention to ensure exchange rate stability, reflecting Vice Finance Minister Masato Kanda’s stance. However, the currency could remain under pressure due to stark US-Japan interest rate differentials favoring carry trades.

Meanwhile, Japan’s 30-year government bond yield soared to its highest level since 2010 following a report of stronger-than-expected retail trade and indications from the Bank of Japan (BoJ) of possible interest rate hikes if inflation rises as projected. As a result, yields could continue to climb if the Bank of Japan maintains its hawkish stance.

Market participants are now focused on upcoming inflation data in Japan and US Personal Consumption Expenditure (PCE) data tomorrow, which could further influence rate outlooks. US Core PCE is anticipated to rise to 2.6% year-on-year, below the current reading of 2.7%. Should PCE reveal better-than-expected results, the yen could face further downward pressure against the dollar. Higher-than-expected Japanese inflation could strengthen yields and support the yen.