Japan’s 10-year government bond yield fell to around 1.55% on Friday, marking its third consecutive session of decline following the release of inflation data. Headline inflation slowed slightly to 3.3% in June 2025 from 3.5% in May, although it remained above the Bank of Japan’s 2% target for the 39th consecutive month. This persistent above-target inflation strengthened expectations that the central bank might move toward tightening its monetary policy stance.
Meanwhile, data released on Wednesday showed that Japan’s trade surplus shrank in June, falling short of expectations as exports dropped for a second straight month and imports inched higher. These developments have raised concerns over Japan’s economic outlook, especially as trade tensions rise. A new 25% US tariff on Japanese goods, set to begin August 1, adds to the existing levy on auto exports—Japan’s leading export to the US. Investors are now focused on Japan’s upcoming Upper House election, scheduled for July 20, 2025.
