Will the Japanese Yen continue its downward pressure?

Here's what's worth watching: the yield spread between the 10-year US Treasury and Japan's 10-year government bond has compressed to just 2.09 percentage points. That's the tightest gap we've seen since March 2022.

What does that mean? Over the past year alone, this differential has narrowed by 1.41 percentage points. When US rates stay elevated relative to Japanese rates, it typically weakens the Yen—making carry trades less attractive and putting selling pressure on the currency.

The shrinking gap signals potential headwinds for JPY strength, especially if global rate differentials continue shifting.