FX.co ★ Japan 10-Year Yield Hovers Near 2008 Highs

Japan’s 10-year government bond yield remained stable at approximately 1.56% on Friday, close to its peak not seen since 2008. This stability comes on the back of inflation data that exceeded projections, thereby strengthening the anticipation of potential additional tightening measures by the Bank of Japan (BOJ). For April, core inflation jumped to 3.5% compared to the same month the previous year, surpassing predictions and reaching its highest level in over two years, while overall inflation held steady at 3.6%. This persistent inflation reinforces the perception that inflationary pressures are solidifying, leading markets to anticipate a higher terminal policy rate. BOJ board member Asahi Noguchi noted that the recent uptick in Japanese yields indicates changing expectations in the market regarding future rate adjustments. Nonetheless, he clarified that there is, at present, no urgent requirement to significantly modify the central bank’s bond tapering schedule. Meanwhile, the BOJ continues to methodically reduce its bond purchases by ¥400 billion per quarter, aiming for a purchasing rate of approximately ¥2.9 trillion monthly by the spring of 2026.