"The yen is weakening despite narrowing Japan-US interest rate differentials, which means it has little to do with BOJ policy," he said in an interview on Monday. "I think investors are starting to demand a higher premium for Japan's fiscal risk," which is also clear in recent rises in Japanese government bond (JGB) yields, he said. The BOJ's rate-hike cycle would increase the cost of funding Japan's huge public debt, which is seen growing further on the back of Prime Minister Sanae Takaichi's expansionary fiscal policy. "It's hard to erase market doubts over Japan's finances after Takaichi so powerfully branded her policies as proactive fiscal policy," he said. "Rising bond yields will be the biggest risk to Japan's economy next year."

Source: The Edge Markets December 23, 2025 05:11 UTC