Japan 10-Year Yield Slips After BOJ Decision

Japan’s 10-year government bond yield slipped to around 2.98% after the Bank of Japan raised interest rates in a widely anticipated move, with two officials dissenting from the decision. The central bank increased its policy rate by 25 basis points to 1.25%, the highest level since 1995. Board members Asada and Sato opposed the hike, suggesting the BOJ may proceed with further increases at a slower pace than initially expected. Meanwhile, Governor Kazuo Ueda said the central bank remains committed to raising rates and adjusting the degree of monetary accommodation in response to changing economic conditions, while noting that accommodative conditions are expected to remain in place to support economic growth. Japanese markets will be closed from September 21 to 23 for national holidays.

Japan’s 10-year government bond yield slipped to around 2.95% on Friday, extending its decline into a third session after the Bank of Japan raised its policy rate by 25 basis points to 1.25% in a widely expected move, the highest level since 1995. Investors will now watch for signals on further tightening as policymakers navigate rising inflation and wage growth, along with pressure from US Treasury Secretary Scott Bessent to pursue more aggressive rate increases. Meanwhile, Japan’s core inflation eased to 1.7% in August from 1.8% in July, marking its first slowdown in four months. However, expectations that price pressures could strengthen in the coming months continued to support a hawkish BOJ outlook, while disruptions in the Middle East added to inflation risks. Japanese bond yields also followed declines in global yields as falling oil prices helped ease concerns over inflation.

Japan’s 10-year government bond yield remained just below 3% on Thursday, staying near its highest level since September 1996 as investors awaited the upcoming Bank of Japan policy decision. The BOJ is widely expected to raise borrowing costs on Friday as policymakers contend with persistent inflationary pressures, with another rate increase anticipated by the end of January. US Treasury Secretary Scott Bessent has also repeatedly called on the BOJ to pursue more aggressive tightening to limit excessive yen weakness. Meanwhile, markets continued to assess Japan’s fiscal outlook amid Takaichi’s plans for substantial government spending and tax cuts. Elsewhere, the US Federal Reserve raised interest rates for the first time in three years and signaled further tightening this year to curb inflation.