The Japanese yen continued its recent tumble today, as the dollar edged to a seven-month high of ¥80.3175 this afternoon.The currency had not crossed above the ¥80 mark against the dollar since July 11, data provided by Bloomberg shows.
Traders may be tying the depreciation to concerns that the Japanese government could lose its ability to fund debt locally, causing a surge in yields, and the recently reported trade deficit in the nation.
“So far, Japan has funded 95% of its public sector debt issuance domestically, which has allowed JGB yields to stay low,” Morgan Stanley’s Hans Redeker and Ronald Leven wrote in a report this week. “Japan’s financial sector has used 24% of its balance sheet on government bonds, and should bond yields rise without a simultaneous economic rebound, the banking sector could face its ‘Italian moment’.”
Japan’s trade deficit has also emerged as a key fear.
“There is a widespread perception that this external deficit is another way in which Japan is becoming dependent on foreign investors to provide savings,” the two say. “But, as with the internal funding situation, we think the situation is less serious than generally perceived.”
Other currencies also traded lower against the dollar today, with Great Britain’s pound and Canada’s dollar falling to $1.5679 and $1.0006, respectively.