US Dollar in Focus as Japan Hints at Tightening, Lifts Global Bond Yields and Clouds Fed Rate-Cut Outlook

Japan, as the largest foreign holder of U.S. Treasuries, could tighten policy, prompting capital reallocations away from U.S. debt toward domestic assets, potentially interrupting the downward trend in global yields and adding market uncertainty.

In comments that surprised markets, Bank of Japan Governor Haruhiko Kuroda signaled a possible rate hike later this month, lifting global government bond yields as investors reassess policy paths. The Japan 10-year yield closed at about 1.879%, a high not seen since June 2008, while the U.S. 10-year Treasury yield rose to roughly 4.095%.

With Japan’s holdings near $1.2 trillion, a policy shift could draw funds away from U.S. debt, complicating the Fed rate-cut trajectory and sustaining volatility in the global bond market.

As markets monitor policy cues, higher yields may temper risk appetite across assets, including cryptocurrency, by diminishing the relative appeal of risk-free returns from bonds and altering cross-asset flows.