FX.co ★ Japan 10-Year Bond Yield Drops to Four-Month Low

Japan’s 10-year government bond yield fell to around 2.67% on Friday, its lowest level in four months, as an accelerating global equity selloff boosted safe-haven demand for sovereign debt. The decline followed a sweeping Democratic victory in the US midterm elections, which intensified concerns about tighter regulation of the artificial intelligence sector and a potential slowdown in data center investment.

Market participants also expect Democrats to advocate for an end to the conflict with Iran, a scenario that could weigh on oil prices and ease inflationary pressures.

On the domestic front, data showed that nominal wages in Japan rose at their fastest pace in nearly three decades, strengthening expectations for another Bank of Japan interest rate increase in December. Minutes from the BOJ’s September meeting further signaled that policymakers may quicken the pace of monetary tightening while assessing the implications of developments in the Middle East, expanding AI-related demand, and foreign exchange movements.