FX.co ★ Japan 10-Year Yield Falls as Inflation Slows

Japan’s 10-year government bond yield fell toward 2.1% on Friday, reaching a six-week low as both headline and core inflation eased in January amid government efforts to alleviate cost-of-living pressures. Headline inflation slowed to 1.5% from 2.1%, the lowest level since March 2022, while core inflation aligned with the Bank of Japan’s 2% target, marking its slowest pace in two years. These figures give the central bank more leeway before moving toward interest rate hikes, especially against the backdrop of a sluggish economic recovery last quarter. Meanwhile, Prime Minister Sanae Takaichi is expected to open the new parliamentary session by presenting plans to expand strategic investment, pursue “active but responsible” fiscal policy, and strengthen Japan’s diplomatic stance. Elsewhere, the latest 20-year JGB auction saw weaker demand than the 12-month average, as lower yields dampened investor appetite.