FX.co ★ Japan 10-Year Yield Extends Rally on Fiscal Concerns

Japan's 10-year government bond yield surged to nearly 1.6% on Wednesday, marking its highest point since late 2008. This increase is fueled by heightened expectations of expanded fiscal spending as the Upper House election on July 20 approaches. Market participants are increasingly factoring in the likelihood of new stimulus initiatives, possibly including a reduction in the consumption tax, as policymakers aim to bolster economic growth. This rise in yields persists despite the Ministry of Finance reducing the issuance of super-long bonds, suggesting significant upward pressure on shorter-term rates. Investors are also keenly observing forthcoming trade and inflation data for insights into how potential US tariff actions might impact Japan's economy. Additionally, Japanese yields mirrored the upward trend in US Treasury yields, following recent US consumer inflation data that led traders to reassess the prospects of imminent Federal Reserve rate cuts.