FX.co ★ Japan 10Y Yield Tracks US Treasury Yields Higher

Japan’s 10-year government bond yield rose to around 2.78% on Thursday, tracking the increase in US Treasury yields after the Federal Reserve left interest rates unchanged, even as three FOMC members dissented in favor of a rate hike. Chair Kevin Warsh emphasized that the decision to hold rates steady should not be interpreted as policy inertia, and noted that markets will continue to react to incoming economic data.

Meanwhile, the Bank of Japan is widely expected to keep interest rates unchanged on Friday, while signaling that further rate hikes remain possible to contain inflationary pressures and support the yen. Japanese government bond yields have been volatile this month amid a deteriorating fiscal outlook, with Takaichi’s administration recently announcing a large-scale spending package that could further increase the country’s debt burden.