FX.co ★ Japan 10-Year Yield Rises Ahead of Premier Vote

Japan's 10-year government bond yield increased to approximately 1.66% on Monday, recovering from a four-week low, as market participants braced for Tuesday's leadership election to determine the nation's forthcoming prime minister. Market sentiment was impacted by the announcement that the ruling Liberal Democratic Party and the Japan Innovation Party have reached an agreement to establish a coalition government, potentially positioning Sanae Takaichi as Japan's first female prime minister. This anticipated "Takaichi trade," driven by expectations of increased fiscal expenditure and accommodative monetary policies, spurred activity in equity markets while prompting sales of domestic bonds and the yen. Additionally, investors are turning their focus to the upcoming Bank of Japan meeting, where policymakers are broadly projected to maintain the current interest rates. Furthermore, demand for safe-haven assets diminished as risk sentiment improved and signs emerged of alleviating trade tensions between the US and China.