Japan 10Y Yield Tracks US Yields Lower

Japan’s 10-year government bond yield fell to around 3.03% 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 despite the recent selloff. 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.

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.

Japan’s 10-year government bond yield climbed to around 3.12% on Tuesday, staying close to its highest level in three decades as Prime Minister Sanae Takaichi continued to pursue fiscal expansion despite concerns over a weak yen and elevated bond yields. Speaking to parliament, Takaichi pledged to lower the consumption tax on food and promote domestic investment while assuring markets that the government would fund the measures without issuing new bonds. Investors are also awaiting a series of economic indicators this week, including August figures for wages, the current account and household spending, as well as September data on consumer confidence and machine tool orders. Meanwhile, minutes from the Bank of Japan’s September meeting showed policymakers placing greater emphasis on containing inflation above the central bank’s 2% target. The discussion kept expectations for another rate hike this year alive, although officials provided limited guidance on the timing.