HSBC Warns Yen’s Surging Risk Premium Has Few Easy Fixes

Fears of steep government spending and resurgent inflation in Japan are driving a breakdown in the yen’s traditional link to the dollar and government-bond yields, prompting HSBC Holdings Plc strategists to reverse their forecasts for the Japanese currency in the months ahead.

Global investors typically think of the yen as closely correlated to interest-rate differentials, finding support as spreads narrow to US Treasuries.