FX.co ★ Japan 10Y Yield Edges Up on Takaichi Report

Japan’s 10-year government bond yield climbed to around 2.1% on Wednesday, rebounding from a six-week low. The move came after reports that Prime Minister Sanae Takaichi had voiced concern about additional interest rate hikes in a meeting with Bank of Japan Governor Kazuo Ueda last week.

Takaichi also nominated two reflationist academics to the BOJ’s policy board, reinforcing expectations that the central bank will proceed cautiously with further tightening. A long-standing advocate of pro-growth measures, she favors both expansionary fiscal policy and accommodative monetary conditions, adding uncertainty to the likely pace of future BOJ rate increases even as speculation grows that the bank could resume policy normalization later this year.

Japanese government bond yields had recently been under downward pressure amid optimism that Takaichi’s expansionary policy agenda could help support economic growth without placing excessive strain on public finances.