Japan 10-⁠yr yield → USD/JPY

Common explanation (Cause · yen strengthens): Rising Japanese rates make borrowing yen to invest costlier, so money flows back to Japan.

This issue: Japan 10-⁠yr yield at 100 (hot), USD/JPY at 94 (hot) — both above normal, not in line with the common explanation (this is an inverse link).

Hot and cold describe position, not good or bad: warm does not mean a fall is coming, and an extreme reading does not mean a quick reversal. We describe history only, with no buy or sell advice.

Where it stands now

Where the two indicators stand this issue

Japan 10-⁠yr yield: 2.50 percentage points above its 10-year average. USD/JPY: 24.3% above its 10-year average.

Tests

Does this link hold up?

Common explanationRising Japanese rates make borrowing yen to invest costlier, so money flows back to JapanSource: European Central Bank, “Financial Stability Review, November 2024” (2024). It covers a single episode, the Bank of Japan’s rate hike in August 2024, not the 10-year bond yield.
Tested against our dataAgreement between the positions of Japan 10-⁠yr yield and USD/JPY (2-month lag), measured in the direction of the common explanation: −0.06 (an opposite-direction link: the raw correlation is +0.06, and a negative correlation fits, so the sign is flipped). Looking at every 5-year period (shifted one year at a time), the two moved in that direction in 10 of 16; data start only in 2006. In most periods the two moved the way the common explanation says, but their highs and lows do not line up over the whole history, so overall no relationship is visible.Not visible in our data
Periods when it did not holdAcross 16 5-year periods, out of step in 2006⁠–⁠2012 and 2018⁠–⁠2026.

History

The two lines, overlaid

Data: Ministry of Finance, Japan (Public Data License, Version 1.0); Federal Reserve H.10, via FRED (Federal Reserve Bank of St. Louis). Positions: our calculation.

Japan 10-⁠yr yieldUSD/JPY

Limits

What this card cannot tell you

Moving together does not prove that one causes the other.
Links change over time; periods when this one did not hold are listed in full.
This is the historical record, not a forecast.

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