FX.co ★ Japan 10-Year Yield Gains on Strong Economic Data

Japan's 10-year government bond yield has surged past 1.81%, approaching levels not seen in 17 years, buoyed by unexpectedly robust economic data. Both October's industrial production and retail sales exceeded forecasts, while the unemployment rate remained unchanged. Additionally, Tokyo’s core inflation surpassed predictions, reinforcing the likelihood of a potential interest rate hike by the Bank of Japan in the near future. Recent speculation has increased, suggesting that the central bank could raise rates next month, driven by ongoing inflation, a weakening yen, and diminished political impetus to sustain low rates. Concurrently, Japan’s cabinet has sanctioned a 21.3 trillion yen stimulus package, marking the largest such measure since the Covid-19 pandemic and significantly surpassing last year's 13.9 trillion yen supplementary budget. This move has sparked concerns regarding Japan's fiscal stability. Reports indicate that Prime Minister Sanae Takaichi’s administration intends to issue at least 11.5 trillion yen in additional bonds to finance the expenditure.