Japan 10-Year Yield Hits Fresh 30-Year High

Japan’s 10-year government bond yield declined to around 3% on Tuesday, reaching its lowest level in nearly three weeks and tracking a broader retreat in global bond yields as the recent selloff in government debt lost momentum. Investors also responded to data showing Japan’s producer prices rose 6.8% in September, below market expectations of 7.6% and marking the slowest increase since May. Nevertheless, the figures pointed to persistent inflationary pressures, reinforcing expectations of a potential near-term interest rate hike. Bank of Japan Governor Kazuo Ueda said the timing and pace of future rate increases would depend on how rising wholesale prices pass through to consumer inflation and the resulting impact on consumption. However, uncertainty remained over whether the central bank would raise rates again this month, although markets continued to anticipate a possible move in December or January.

Japan’s 10-year government bond yield fell toward 3% on Friday, hitting a two-week low as it tracked a decline in US Treasury yields following strong demand at the latest US 30-year bond auction. Domestically, data showed that Japan’s personal spending declined for a ninth consecutive month in August, as persistent inflation continued to weigh on consumer demand. On the monetary policy front, BOJ board member Ayano Sato, who previously opposed the central bank’s September rate hike, said this week she supported a gradual approach to raising interest rates in several stages, reinforcing expectations of further policy tightening. Meanwhile, Prime Minister Sanae Takaichi continued to pursue expansionary fiscal policies despite concerns over the weak yen and elevated bond yields, pledging to cut the consumption tax on food while emphasizing that the measures would be financed without issuing additional government bonds. Japanese markets will be closed on Monday for a holiday.

Japan’s 10-year government bond yield fell below 3.1%, retreating from 30-year highs as investors weighed the outlook for further Bank of Japan policy tightening. BOJ member Ayano Sato, who previously dissented from the central bank’s September rate hike, said she favored a gradual approach to raising interest rates in multiple stages, adding to expectations that policymakers could move again. Meanwhile, data showed Japan’s real wages increased 1.5% year-on-year in August, extending their gains to an eighth straight month and reinforcing expectations for further BOJ rate hikes. Elsewhere, Prime Minister Sanae Takaichi continued to pursue expansionary fiscal measures despite concerns over the weaker yen and elevated bond yields. In a parliamentary address, Takaichi pledged to lower the consumption tax on food while emphasizing that the government would fund the measures without issuing additional bonds, seeking to ease concerns in financial markets.