FX.co ★ Japan 10-Year Yield Rises as Snap Election Looms

Japan’s 10-year government bond yield climbed approximately 3 basis points, reaching around 2.27% on Monday. This movement occurred as investors anticipated the snap election for the lower house scheduled for February 8. In this election, Prime Minister Sanae Takaichi’s ruling party is expected to gain additional seats and advocate for more expansive fiscal policies. Last month, Japanese government bonds and the yen experienced pressures due to expectations of fiscal stimulus, including potential tax cuts, which could further challenge the nation’s already strained financial situation.

In parallel, the Bank of Japan's January meeting summary revealed increasing concerns about the necessity of timely interest rate increases. Members are closely observing the effects of a weaker yen on inflation. The summary indicates a possibility that rate hikes could occur more swiftly than the market's current expectations, which predict approximately one rate increase every six months following the rate hike in December.