Japan 10-Year Yield Falls for Second Session

Japan’s 10-year government bond yield fell to around 2.9% on Friday, declining for a second consecutive session and moving further away from its highest levels since 1996 as the global bond selloff eased. A successful sale of 30-year Japanese government bonds this week also eased market concerns and indicated that investment demand remains firm, with domestic pension funds seeking to increase their JGB allocations in anticipation that the Bank of Japan will accelerate its rate-hiking cycle. Those expectations were reinforced by hawkish remarks from BOJ officials and mounting pressure from the US to support the yen through tighter monetary policy. BOJ board member Hajime Takata raised the possibility of outsized or back-to-back rate hikes, while Governor Kazuo Ueda said policymakers need to pay closer attention to upside price risks. The BOJ is expected to deliver a quarter-point rate hike this month, followed by another increase in December.

Japan’s 10-year government bond yield fell to around 2.96% on Thursday, pulling back from its highest levels since 1996 as a successful sale of 30-year government bonds eased market concerns after a sharp selloff in bond markets this week. Japanese bond yields also tracked US Treasury yields lower, while oil prices halted their rally after President Donald Trump said the latest attacks on Iran would be short-lived, easing inflation concerns. Additionally, a sharp rally in the yen reduced pressure on the Bank of Japan to tighten policy aggressively. However, BOJ board member Hajime Takata on Wednesday raised the possibility of outsized or back-to-back interest rate hikes to curb rising inflationary pressures. BOJ Governor Kazuo Ueda also said Tuesday that policymakers need to pay greater attention to upside price risks when conducting monetary policy, signaling that an interest rate hike is likely later this month.

Japan’s 10-year government bond yield climbed above 3% on Wednesday, reaching its highest level since 1996 as surging oil prices heightened inflation concerns and strengthened expectations for imminent interest rate hikes. Bank of Japan Governor Kazuo Ueda said policymakers need to pay greater attention to upside price risks when conducting monetary policy, signaling that a rate hike is likely later this month. US Treasury Secretary Scott Bessent also urged Ueda to take “decisive” monetary steps to combat yen weakness. Japan’s deteriorating fiscal outlook, amid the Takaichi administration’s plans for massive spending and tax cuts, fueled the surge in domestic bond yields as well. Meanwhile, oil prices advanced for a third consecutive session amid escalating hostilities between the US and Iran, raising concerns over further disruptions to energy flows from the Middle East. Higher energy costs exacerbate import-driven inflation in Japan given its reliance on oil imports.