Japan’s 10-year government bond yield fell by more than 10 basis points to around 2.76% on Friday, its lowest level since early August, as a global selloff in technology and artificial intelligence stocks drove investors toward safer assets. In periods of heightened market uncertainty, Japanese investors often repatriate overseas funds, bolstering demand for the yen and Japanese government bonds.
At the same time, data showed that both headline and core inflation in Japan rose 2.1% year-on-year in September, the highest rate in nine months, as yen depreciation and elevated energy prices pushed up import costs. With underlying inflation now back above the Bank of Japan’s 2% target, market expectations for another interest rate hike this year have strengthened. Even so, the BOJ is widely expected to leave its policy rate unchanged at its upcoming meeting, with a possible increase anticipated in December.
