Japan’s 10-Year Bond Yield Falls to 6-Week Low

Japan’s 10-year government bond yield dropped below 2.9% on Thursday, reaching its lowest level in six weeks as a global selloff in technology and artificial intelligence stocks boosted demand for safe-haven domestic bonds. Concerns over Japan’s fiscal outlook also eased after Prime Minister Sanae Takaichi repeatedly assured markets that the government would avoid increasing the debt burden despite plans to cut taxes on food. Meanwhile, the Bank of Japan is widely expected to leave interest rates unchanged at next week’s policy meeting before potentially raising them in December amid persistent inflationary pressures. On Wednesday, BOJ Deputy Governor Ryozo Himino said underlying inflation was approaching the central bank’s 2% target and cautioned against delaying policy adjustments, echoing hawkish remarks made by Governor Kazuo Ueda earlier this week.

Japan’s 10-year government bond yield fell to around 2.9% on Tuesday, nearing six-week lows after the latest 20-year bond auction attracted record demand, reflecting strong investor interest in higher-yielding debt. Japanese yields have climbed to multi-decade highs earlier this month following a global bond selloff driven by persistent energy-related inflation amid the conflict in the Middle East. Japan’s worsening fiscal outlook also contributed to rising yields as Prime Minister Sanae Takaichi pursued expansionary fiscal policies, although she has repeatedly sought to reassure markets that the government would avoid adding to the debt burden. On the monetary policy front, the Bank of Japan is widely expected to keep interest rates unchanged next week, with Governor Kazuo Ueda anticipated to provide further guidance on the timing of the next rate hike.

Japan’s 10-year government bond yield declined to around 2.9%, hovering near five-week lows after Prime Minister Sanae Takaichi pledged to “appropriately” manage annual debt issuance, emphasizing the importance of fiscal discipline and economic resilience in supporting the yen and maintaining stable public finances. She highlighted the need to balance economic growth with fiscal responsibility as Japan faces a debt burden of approximately $7 trillion, the largest among advanced economies, in an effort to reassure investors. Meanwhile, Bank of Japan Governor Kazuo Ueda said underlying inflation was already close to the central bank’s 2% target, signaling a mildly hawkish stance. He also attributed inflationary pressures to a moderate economic recovery and tight labor market conditions.