Jonathan Fortun’s research and commentary on Japan’s economy, the yen, government bonds and the international effects of monetary policy.
Japan connects domestic monetary choices with financial markets far beyond its borders. My work examines how interest rates, inflation, wages and public finances interact with the yen and Japanese government bonds. The question is not only where the policy rate goes, but how a change in the monetary regime reaches investors, households and international markets.
Government bond yields offer one way into that question. Central bank purchases, demand from domestic institutions and participation by foreign investors shape the market together. Reading those changes alongside fiscal constraints and inflation helps distinguish shifts in bond pricing from broader pressures on the economy.
The yen provides another connection to the global system. Currency valuation, intervention and investment income link Japan’s domestic economy to international capital allocation. The research and commentary collected here examine those mechanisms through published IIF analysis and public conversations, with the date and context of each assessment preserved.
Jonathan Fortun / Institute of International Finance
Jonathan Fortun asks whether fiscal pressure is behind the rise in long Japanese yields and the weakness of the yen. The note finds that the 10 year JGB yield has risen by more than 100 basis points in 2026, even as its premium over swaps has narrowed. Forward rates five to ten years out sit well above the Bank of Japan's estimated neutral range, which points to a higher expected policy path, greater uncertainty, or both. The yen is also weak relative to the U.S. and Japanese yield gap, possibly reflecting fiscal expansion and outward investment by residents. Because average coupons trail current yields, interest costs should keep climbing as debt rolls over.
Jonathan Fortun / Institute of International Finance
A changing investor base is adding pressure to Japan's longest bonds as the Bank of Japan reduces its purchases. Weaker demand from life insurers and greater foreign participation make yields more sensitive to global bond-market conditions, even after reductions in super-long issuance. Stabilizing long-term borrowing costs may therefore require domestic demand, changes in issuance maturities or direct bond-market measures alongside decisions about the policy rate.
Fortun comments on the policy trade-offs surrounding coordinated yen intervention and the role of Japanese interest rates in supporting exchange-rate stability.
Bloomberg examines US interests surrounding coordinated support for the yen. Jonathan Fortun questions whether the intervention is simply a diplomatic gesture and points to broader American interests in helping Japan support its currency.
Jonathan Fortun / Institute of International Finance
After coordinated US-Japan intervention, the note estimates a medium-term yen equilibrium range of 125–138 per dollar, stronger than the market rate near 157. It distinguishes the model's unadjusted signal from a more conservative undervaluation estimate and shows how investment income retained abroad limits currency-market demand. Intervention may alter near-term risks, but sustained convergence would depend on a better policy mix rather than repeated currency purchases.
Jonathan Fortun / Institute of International Finance
Japan's policy rate has reached 1% amid firmer underlying inflation and pressure on long-term government bonds. Subsidies suppress headline prices, while wage growth, services inflation and a weaker yen could prompt further tightening. Elevated super-long yields reflect fiscal concerns and changing demand, complicating normalization. Wide estimates of the neutral rate favor a flexible assessment of risks over a mechanical policy rule.
Jonathan Fortun / Institute of International Finance
Japan faces an energy shock concentrated in its reliance on Middle Eastern supply routes. A 20 percent increase in Brent would raise its fuel bill by roughly half a percentage point of GDP and lift headline inflation by around 0.6 percentage points under baseline assumptions. Yen weakness and sharper gas prices could amplify the shock, narrowing room for fiscal support and monetary normalization.
Jonathan Fortun / Institute of International Finance
Japan’s fiscal constraint becomes clearer when public assets and liabilities are considered together. Extensive public ownership of debt shifts attention from a sudden funding shock to valuation changes across the consolidated balance sheet. Slow refinancing provides a cushion, but that protection narrows if effective borrowing costs overtake growth or pension and foreign assets lose value.