FX.co ★ Japan 10-Year Yield Falls Ahead of BOJ Verdict

Japan’s 10-year government bond yield edged down to around 2.96% on Friday, marking a third consecutive session of declines as investors positioned ahead of the Bank of Japan’s latest policy announcement. Markets broadly anticipate an interest rate increase, and attention is also focused on any guidance regarding additional tightening measures. Policymakers are balancing rising inflation and wage growth against external pressure, including calls from US Treasury Secretary Scott Bessent for a more assertive pace of rate hikes.

On the data front, Japan’s core inflation slowed to 1.7% in August from 1.8% in July, its first deceleration in four months. Even so, expectations that price pressures could intensify in the coming months are reinforcing a hawkish outlook for the BOJ, while geopolitical tensions in the Middle East are adding upside risks to inflation. Japanese government bond yields also tracked declines in global bond markets, as easing oil prices helped temper broader inflation concerns.