USD/JPY affected by US interest rates... why?

Trading Discussion News and Economy
1

I was reading up on this currency, stumbled on this part and had a bunch of questions:

If I had to identify the main driver of USD/JPY, it would easily be the movements in U.S. interest rates. The main reason for this is the massive amount of U.S. government debt held by the Japanese government and Japanese investors. The Bank of Japan (BOJ) alone holds nearly $900 billion worth of U.S. Treasury debt. If U.S. interest rates begin to fall, the prices of U.S. government bonds rise, increasing the USD-value of Japan’s U.S. debt holdings. To offset, or hedge, their larger USD-long currency exposure, Japanese reserve managers need to sell more USD. This causes USD/JPY to closely track U.S. Treasury yields, as seen in Figure 8-2 which shows the USD/JPY rate and the yield on two-year U.S. Treasury notes on a monthly basis over ten years.

If US interest rates fall, why would the bond prices increase? And why would the Japanese reserve managers need to sell USD to hedge? Wouldn’t they just sell USD/JPY and make a tidy profit?

2

Also, what is a consolidation range? I heard that the USD/JPY can do that.

3

He means the interest rate on bonds (US treasury). If the interest rate falls, the price of bond need to increase as it is less demanded due to lower return on yields.BOJ need to sell more dollars to purchase dollar denominated,more expensive US treasuries. Personally I dont think that it is a main driver of decline in usd/jpy. Mind the fact that yen in low interest rate currency, as swiss frank. In times of recession, investors look for yields. They need to purchase low interes rate currency and buy other assets with it to produce the positive difference in spread ie profit.