FX.co ★ Japan 10-Year Yield Scales Fresh 30-Year High

Japan’s 10-year government bond yield climbed to around 2.95% on Tuesday, its highest level since 1996, amid mounting fiscal concerns and rising expectations of an imminent interest rate hike by the Bank of Japan. Market anxiety has been heightened by the Takaichi administration’s proposal to reduce the consumption tax on food to 1% for two years, as the government has yet to identify a replacement revenue source and the measure is widely viewed as an ineffective way to address inflation, unlikely to secure lasting price stability. At the same time, traders are increasingly betting on a BOJ rate increase as early as September, following a growing chorus of policymakers calling for a more forceful response to persistent inflationary pressures. The central bank is also grappling with continued yen weakness and elevated energy costs linked to the conflict in the Middle East, both of which risk further amplifying inflation.