Japan bond yields rise as US Treasury selloff persists, BOJ outlook in focus
TLT•Japanese government bond yields rose, with the 10-year yield up 5 basis points to 3.11%, tracking higher U.S. Treasury yields. Investors weighed inflation risks and the Bank of Japan’s outlook for further rate increases.
1. Yields rise across maturities
Japan’s 10-year government bond yield rose 5 basis points to 3.11%. The 20-year yield climbed 4.5 basis points to 3.945%, the 30-year added 6 basis points to 4.2%, and the five-year rose 1 basis point to 2.385%. The two-year yield fell 1 basis point to 1.94% after a modestly firm auction eased investor concerns.
2. BOJ policy outlook
A Bank of Japan Tankan survey showed business confidence at an eight-year high in July-September, alongside elevated inflation expectations. A summary of the BOJ’s September meeting, when policymakers raised borrowing costs by 25 basis points to a 31-year high, said some saw a need to accelerate tightening, while a Cabinet Office representative urged caution over the economic effects of higher borrowing costs.
3. Inflation risks in focus
Higher U.S. Treasury yields followed data that highlighted resilience in the U.S. economy, despite a softer August personal consumption expenditures price index reading. BNP Paribas Asset Management strategist Ryutaro Kimura said political pressure slowing necessary rate hikes could add upward pressure on longer-term interest rates through higher inflation-risk premiums.
