Japan 10Y Bond Yield Hits 17-year High

Japan’s 10-year government bond yield fell to around 2.13% on Friday, ending a three-day advance amid uncertainty over Bank of Japan policy. Earlier this week, the Japanese government appointed two reflationist academics to the BOJ’s policy board, while Prime Minister Sanae Takaichi reportedly expressed concerns about further rate hikes during a meeting with Governor Kazuo Ueda last week. Hawkish board member Hajime Takata reiterated calls for additional rate increases and guidance signaling that the price stability target is nearly achieved. Governor Ueda also reportedly said the central bank would carefully evaluate economic data at its March and April meetings before making rate decisions, leaving the possibility of a near-term hike open. On the data front, Tokyo’s inflation slowed to the lowest pace in over a year, as government utility subsidies helped curb household energy costs, bolstering expectations that the BOJ may delay immediate rate increases.

Japan’s 10-year government bond yield rose to around 2.16% on Thursday, marking a third consecutive session of gains as hawkish signals from the Bank of Japan supported domestic yields. Board member Hajime Takata, regarded as the most hawkish member, called for further rate hikes and for guidance reflecting that the price stability target is nearly met. Governor Kazuo Ueda also reportedly said the central bank will carefully review economic data at its March and April meetings before deciding on rate adjustments, leaving the door open for a near-term hike. These developments followed the government’s nomination of two reflationist academics to the BOJ policy board, reinforcing expectations that the central bank will proceed cautiously with further tightening. The moves steepened the yield curve, with long-term yields rising at the fastest pace in a month.

Japan’s 10-year government bond yield rose to around 2.1% on Wednesday, rebounding from a six-week low following reports that Prime Minister Sanae Takaichi expressed concern over additional rate hikes in a meeting with Bank of Japan Governor Kazuo Ueda last week. Takaichi also nominated two reflationist academics to the central bank’s policy board, reinforcing expectations that the BOJ will take a cautious approach to further rate increases. Known for her pro-stimulus stance, Takaichi supports both expansionary fiscal policies and looser monetary settings, creating uncertainty around the pace of BOJ rate hikes even as speculation mounts that the central bank could resume policy normalization later this year. Japanese yields had been pressured recently amid hopes that Takaichi’s expansionary policies would stimulate growth without putting undue strain on public finances.