FX.co ★ Japan 10Y Yield Eases as BOJ Rate Outlook in Focus

Japan’s 10-year government bond yield fell below 3.1% on Wednesday, pulling back from 30-year highs as investors reassessed the prospects for further monetary tightening by the Bank of Japan. BOJ board member Ayano Sato, who previously dissented from the central bank’s September rate hike, signaled support for a gradual, multi-stage approach to raising interest rates, reinforcing expectations that policymakers may move again.

At the same time, data showed that Japan’s real wages rose 1.5% year-on-year in August, marking an eighth consecutive month of gains and bolstering the case for additional BOJ rate increases.

Elsewhere, Prime Minister Sanae Takaichi continued to advance expansionary fiscal policies despite concerns over the weak yen and elevated bond yields. In a parliamentary address, Takaichi pledged to cut the consumption tax on food, while stressing that the government would finance the measures without issuing new bonds, in an effort to reassure financial markets.