FX.co ★ Japan 10Y Yield Falls as BOJ Holds Rates

Japan’s 10-year government bond yield fell below 2.8% on Friday, nearing its lowest level in almost three months, after the Bank of Japan left its policy rate unchanged at 1.25% as widely expected. At the same time, the central bank indicated that underlying inflation has finally reached its 2% target, raising the prospect of a rate hike in December.

The decision was adopted by an 8–1 majority, with board member Hajime Taka dissenting in favor of lifting rates to 1.5%. Taka argued that the economy has entered a new phase that warrants a quicker move toward a neutral interest rate.

Safe-haven demand for government bonds also strengthened as weaker-than-expected earnings from major technology firms renewed doubts about the AI-driven rally and triggered another selloff in equities. In addition, global asset managers are once again turning to Japan’s bond market, as firmer domestic demand and a more supportive monetary policy outlook enhance the attractiveness of Japan’s relatively higher yields.