FX.co ★ Japan 10Y Yield Steadies on Hawkish BOJ Bets

Japan’s 10-year government bond yield held near 2.91% on Monday, stabilizing after a two-day pullback, as expectations strengthened that the Bank of Japan may raise interest rates this month. Takuji Aida, an economic adviser to Prime Minister Sanae Takaichi, said the BOJ is likely to hike rates in September and deliver another increase by January next year. His remarks signal a growing acknowledgment within the Takaichi administration—previously inclined toward a dovish stance—that further BOJ tightening may be necessary to stem excessive yen weakness. Japanese bond yields have also moved higher this year amid concerns that government spending could increase under Takaichi’s expansionary fiscal policy. At the same time, an unusual meeting of the management team at Japan’s Government Pension Investment Fund has fueled speculation that the $2 trillion institution may raise its target allocation to domestic bonds.