FX.co ★ Japan 10-Year Yield Holds Near 17-Year Highs

Japan's 10-year government bond yield remained above 1.6% on Monday, staying close to levels not seen in 17 years. This persistence reflects investor speculation regarding the Bank of Japan's future policy decisions, especially in light of recent economic indicators. Notably, in the second quarter of 2025, capital spending grew by 7.6%, surpassing both the previous quarter's 6.4% and analysts' expectations of 6.2%. This rise highlights strong corporate investment. Conversely, the August manufacturing PMI was adjusted down to 49.7 from an earlier 49.9, marking the 13th time in 14 months that factory activity has contracted. Bank of Japan Governor Kazuo Ueda has commented that wages are anticipated to rise due to a tightening labor market, fueling speculation that the conditions for a potential interest rate hike are gradually taking form. Although the Bank of Japan maintained the current rates in July, it increased inflation forecasts and adopted a more optimistic outlook on the economic future.