FX.co ★ Japan 10-Year Yield Climbs on GDP Beat, BOJ Speculation

Japan's 10-year government bond yield advanced beyond 1.56% on Friday, marking its fifth consecutive session of increases. This upward movement is attributed to stronger-than-anticipated GDP figures and heightened expectations for a potential interest rate hike by the Bank of Japan, which have driven selling activity in government bonds. The economy recorded a 0.3% expansion in the second quarter, surpassing the previous 0.1% growth and aligning with forecasts. This growth was largely propelled by net exports, contributing 0.3 percentage points despite challenges posed by US tariffs. JGB yields gained further momentum following remarks by US Treasury Secretary Scott Bessent, who indicated that the Bank of Japan is lagging in its response to inflation. Moreover, the central bank faces pressure to reconsider an inflation index linked to domestic demand and wage growth, which has thus far curtailed monetary tightening. Nonetheless, Governor Kazuo Ueda remains cautious, emphasizing that "underlying inflation" has yet to reach the 2% target.