Japan 10Y Yield Edges Up on Takaichi Report

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.

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.