FX.co ★ Japan 10-Year Yield Slips on Market Caution

Japan's 10-year government bond yield decreased to approximately 1.59% on Friday, breaking a two-day upward trend as investors re-evaluated the effects of the US-Japan trade agreement and the broader policy outlook. This agreement entails a 15% tariff on Japanese goods exported to the United States, which is notably lower than the previously threatened 25% by President Donald Trump. While this provides some relief, trade-related uncertainty remains high. On the economic data front, Tokyo's core inflation rate for July was below expectations, yet it stayed considerably above the Bank of Japan's 2% target, thus strengthening market expectations of another rate hike later this year. The Bank of Japan is set to announce its policy decision next week, with widespread anticipation that rates will remain unchanged. However, it is expected that the BOJ will revise its inflation forecast upwards in its quarterly outlook. Earlier in the week, Deputy Governor Shinichi Uchida expressed a cautious approach toward further tightening, citing increased uncertainty surrounding global trade policies and their potential negative impact on economic growth.