Japan 10-Year Yield Falls to 6-Week Low

Japan’s 10-year government bond yield dropped to around 2.1% on Tuesday, marking a six-week low as uncertainties over US President Donald Trump’s trade policies increased demand for safe-haven debt. Over the weekend, Trump threatened to raise global tariffs from 10% to 15% following a Supreme Court ruling that struck down his reciprocal tariffs, and warned of steeper duties on countries that “play games” with existing trade agreements. Tokyo urged Washington to ensure the ruling would not harm Japanese firms and reaffirmed its commitment to the US trade deal. Japanese yields have also been pressured by optimism following Prime Minister Sanae Takaichi’s landslide election victory earlier this month, with hopes that her expansionary fiscal policies will stimulate growth without straining public finances.

Japan’s 10-year government bond yield declined toward 2.1% on Friday, hitting a six-week low as both headline and core inflation eased in January amid government measures to relieve cost-of-living pressures. Headline inflation dropped to 1.5% from 2.1%, the lowest since March 2022, while core inflation matched the Bank of Japan’s 2% target, marking the slowest pace in two years. The data gives the central bank additional time before considering interest rate hikes, particularly amid a tepid economic rebound last quarter. Meanwhile, Prime Minister Sanae Takaichi is set to open the new parliamentary session by outlining plans to boost strategic investment, pursue “active but responsible” fiscal policies, and advance assertive diplomacy. Elsewhere, the latest 20-year JGB auction drew weaker demand than the 12-month average, as lower yields tempered investor interest. Japanese markets will be closed on Monday for a holiday.

Japan’s 10-year government bond yield held steady around 2.15% on Thursday, hovering near six-week lows, after the latest 20-year JGB auction drew weaker demand than the 12-month average, as lower yields tempered investor interest. The 20-year yield hovered near 2.98%, down from an almost three-decade high of 3.46% reached last month. Yields surged in January after Prime Minister Sanae Takaichi proposed a two-year cut to the sales tax on food, raising concerns about the fiscal outlook. They later retreated following Takaichi’s landslide election victory, which eased political uncertainty and bolstered expectations that her fiscal expansion plans could support economic growth. Separately, data showed Japan’s machinery orders jumped in December after a November slump, driven by one-off large bookings from refineries and nuclear fuel producers.