FX.co ★ Japan 10-Year Yield Hits 3-Week High

Japan’s 10-year government bond yield rose above 2.7% on Wednesday, its highest level in three weeks, as the sharp depreciation of the yen reinforced expectations that the Bank of Japan may further tighten monetary policy. The yen weakened to a four-decade low, pressured by wide interest rate differentials, persistent carry trades, and broad US dollar strength.

Last week, BOJ Governor Kazuo Ueda reiterated that the central bank is prepared to raise interest rates again if economic activity, inflation, and financial conditions develop in line with its projections. In parallel, Prime Minister Sanae Takaichi appointed Ayano Sato to the BOJ board. Sato noted that Japan’s inflation expectations remain relatively subdued, a view that points to a more accommodative policy bias.

On the economic front, business confidence among Japan’s large manufacturers has climbed to its highest level since 2018, highlighting the resilience of the economy despite the energy shock stemming from the conflict in the Middle East.