Japan 10-Year Yield Hits Fresh 17-Year High

Japan’s 10-year government bond yield climbed to around 2.66% on Monday as Bank of Japan Deputy Governor Ryozo Himino stated recently the central bank will continue raising interest rates while carefully monitoring the risk that underlying inflation could exceed its 2% target. He added that Japan’s economy remains resilient, supported by solid corporate earnings and rising household incomes. Last week, the BOJ raised its policy rate by 25 basis points to 1% in an effort to contain inflation and support the weakening yen. Meanwhile, recent data showed Japan’s core inflation remained unchanged at 1.4% in May, in line with expectations, indicating that underlying price pressures stayed moderate despite concerns that higher energy costs could drive inflation higher. The comments reinforced expectations that the BOJ will maintain its gradual tightening path if economic and price conditions continue to evolve as anticipated.

Japan’s 10-year government bond yield steadied around 2.63% on Thursday as investors assessed recent central bank decisions alongside evolving geopolitical developments in the Middle East. The US Federal Reserve kept interest rates unchanged on Wednesday but signaled growing support for rate hikes later this year. At the same time, the Bank of Japan raised its policy rate by 25 basis points to 1% on Tuesday in an effort to curb inflation and support a weakening yen. However, the move drew dissent within the board, with Toichiro Asada arguing that downside risks to growth and employment outweigh upside risks to inflation. On the geopolitical front, the US and Iran digitally signed their interim peace agreement, though it remains unclear whether Iran has already begun steps to fully reopen the Strait of Hormuz.

Japan’s 10-year government bond yield slipped to around 2.6% on Wednesday, giving back some of the previous session’s gains despite stronger-than-expected trade data and a recent interest rate hike by the central bank. Official figures showed Japanese exports jumped 17% year-on-year in May, marking the fastest growth since November 2022, supported by solid demand for automobiles and semiconductors. The data followed the Bank of Japan’s decision on Tuesday to raise its policy rate by 25 basis points to 1% in an effort to contain inflation and support the weakening yen. However, the move faced opposition from some board members, with Toichiro Asada arguing that downside risks to economic growth and employment outweigh the upside risks to inflation.