FX.co ★ Japan 10-Year Yield Eases on Renewed Trade Worries

On Friday, the yield on Japan’s 10-year government bond declined to approximately 1.51%, ending a two-day upward trend. This drop was instigated by a renewed appetite for safe-haven assets amid escalating US trade tensions. The situation echoed the decline in US Treasury yields after an appeals court reinstated reciprocal tariffs introduced by President Donald Trump, overturning a previous federal court's decision that had declared them illegal. Domestically, core inflation in Tokyo exceeded expectations, strengthening the likelihood of further interest rate hikes by the Bank of Japan (BOJ). Despite this, BOJ Governor Kazuo Ueda highlighted that the central bank’s recent reduction in its inflation forecast was a response to heightened global economic risks linked to trade policy uncertainties, a deceleration in cost-push inflation, and decreasing oil prices. Ueda emphasized that while the broader inflation outlook remains unchanged, the BOJ’s near-term monetary policy will continue to focus on attaining its 2% inflation target.