USD/JPY has rallied on Thursday as the nominal yield differential between US and Japanese government debt widens. The pair has stopped short of hitting the 104.00 level, but still hit multi-week highs. USD/JPY is consolidating below the 104.00 level as US dollar bulls take a breather after the pair hit its highest levels in four weeks. At present, the pair trades with gains of around 80 pips or 0.8% on the day and JPY is the worst performing G10 currency. The broadly risk-on vibe of the market on Thursday is one reason why JPY has been performing so poorly and likely explains why the next worst performing G10 currency is fellow safe-haven CHF. At present, US stock markets are surging (the S&P 500 crossed above 3800 for the first time and is up 1.3% on the day and the Nasdaq 100 has recovered Wednesday’s losses) and US bond yields are higher as markets price in further government borrowing under a Democrat-controlled Congress which is expected to deliver stronger growth in 2021. Widening US/Japan rate differential hurting the yen More than just the market’s risk-on vibe reducing the demand for the safe-haven yen, the focus is also on the fact that the (nominal) yield advantage of investing in US government debt over Japanese government debt continues to widen significantly as US markets price in 1) a greater supply of US government debt that pushes yields higher and 2) higher inflation expectations that all this additional stimulus creates, that also pushes nominal bond yields higher. At the start of the week, the yield on the Japanese 10-year was around 0.02% and has since barely risen to about 0.35%. As ever, the BoJ policy to keep the 10-year yield close to zero is preventing significant upside. Over the same time period, the US 10-year yield has surged from just above 0.9% to current levels around 1.08%, widening the US/Japanese 10-year yield spread by nearly 15bps. If this spread continues to widen, then further USD/JPY upside could well be in store. However, if this widening is purely being driven by higher inflation expectations in the US, as opposed to an increase in real US yields, then its bullish implications for USD/JPY may be lessened. USD/JPY at multi-week highs FX Street FX Street FXStreet is the leading independent portal dedicated to the Foreign Exchange (Forex) market. It was launched in 2000 and the portal has always been proud of their unyielding commitment to provide objective and unbiased information, to enable their users to take better and more confident decisions. View All Post By FX Street FXStreet News share Read Next S&P 500 top movers: L Brands Inc (LB: NYSE) stock surges to 34 month highs above $46 FX Street 1 year USD/JPY has rallied on Thursday as the nominal yield differential between US and Japanese government debt widens. The pair has stopped short of hitting the 104.00 level, but still hit multi-week highs. USD/JPY is consolidating below the 104.00 level as US dollar bulls take a breather after the pair hit its highest levels in four weeks. At present, the pair trades with gains of around 80 pips or 0.8% on the day and JPY is the worst performing G10 currency. The broadly risk-on vibe of the market on Thursday is one reason why JPY has been performing so poorly and… Regulated Forex Brokers All Brokers Sponsored Brokers Broker Benefits Min Deposit Score Visit Broker 1 $100T&Cs Apply 0% Commission and No stamp DutyRegulated by US,UK & International StockCopy Successfull Traders 9.8 Visit Site FreeBets Reviews$100Your capital is at risk. 2 T&Cs Apply 9.8 Visit Site FreeBets Reviews$100Your capital is at risk. 3 Recommended Broker $100T&Cs Apply No deposit or withdrawal feesTrade major forex pairs such as EUR/USD with leverage up to 30:1 and tight spreads of 0.9 pips Low $100 minimum deposit to open a trading account 9 Visit Site FreeBets ReviewsYour capital is at risk. 4 T&Cs Apply Visit Site FreeBets ReviewsYour capital is at risk. 5 Recommended Broker $0T&Cs Apply Trade gold, silver, and platinum directly against major currenciesUp to 1:500 leverage for forex trading24/5 customer service by phone and email 9 Visit Site FreeBets ReviewsYour capital is at risk.