FX.co ★ Japan 10Y Yield Slips Ahead of Stimulus Announcement

On Friday, Japan's 10-year government bond yield eased to approximately 1.78%, falling from a 17-year peak of 1.84% recorded in the prior session. This decline occurred as investors anticipated the introduction of a substantial stimulus package by Prime Minister Sanae Takaichi’s administration, projected to surpass 20 trillion yen. Members of the ruling Liberal Democratic Party have also advocated for a supplementary budget exceeding 25 trillion yen to support this initiative, significantly more than last year’s extra budget of 13.9 trillion yen. Such extensive spending plans have sparked concerns regarding Japan's fiscal stability, contributing to a 'Sell Japan' trend that has pressured both the yen and domestic bonds. Economically, Japan's core inflation has climbed to a three-month high in October, with exports outperforming expectations. The acceleration in inflation places additional pressure on the Bank of Japan to consider raising interest rates.