FX.co ★ Japan 10-Year Yield Rises on Hawkish BOJ Outlook

Japan’s 10-year government bond yield rose to around 3.1% on Thursday, returning to levels last seen 30 years ago, as strong economic data and hawkish signals from the Bank of Japan bolstered expectations for a quicker pace of monetary tightening. Central bank data showed that manufacturing sentiment in the third quarter improved to its highest reading in more than eight years, while overall business conditions reached their most favorable levels in decades. At the same time, a summary of opinions from the BOJ’s September meeting indicated that policymakers see a need to speed up rate increases or move them closer to the central bank’s target in the near term. Japanese government bonds have also come under sustained selling pressure since the election of Prime Minister Sane Takaichi, amid ambitious spending plans and deteriorating fiscal conditions. Recent reports suggested that PM Takaichi will pledge a flexible response to unexpected market movements in a policy speech scheduled for next week.