FX.co ★ Japan 10-Year Yield Climbs on Hawkish BOJ Signals

Japan’s 10-year government bond yield climbed toward 2.7% on Monday, rebounding from four-month lows as hawkish remarks from Bank of Japan officials reinforced expectations of further monetary tightening. BOJ Chief Economist Seisaku Kameda signaled that the central bank is likely to raise interest rates in December and continue hiking borrowing costs next year, potentially moving rates closer to 2%. BOJ Governor Kazuo Ueda also said that underlying inflation is projected to stay around the BOJ’s 2% target, while warning of “some upside risks.”

At the same time, demand for safe-haven government bonds weakened as global equity markets recovered from the recent AI-related selloff. That downturn had been driven by fears of tighter regulation on the AI industry following the Democrats’ decisive victory in the US midterm elections. Investors now expect Democrats to press for a swift resolution to the conflict with Iran, a development that could put downward pressure on oil prices and help ease inflationary strains.