Japan’s 10-year government bond yield climbed above 1.58% on Tuesday, extending its rally for a seventh straight session as traders increased bets on further Bank of Japan rate hikes. Data released Friday showed that Japan’s economy expanded more than expected in the second quarter, driven mainly by net exports despite headwinds from US tariffs, bolstering the case for a more hawkish policy stance. At the same time, the BOJ faces calls to drop an inflation gauge tied to domestic demand and wage growth that has constrained its tightening moves. Still, Governor Kazuo Ueda has struck a cautious tone, reiterating that “underlying inflation” remains below the bank’s 2% target. Meanwhile, Japanese officials played down remarks from US Treasury Secretary Scott Bessent, who argued the BOJ was “behind the curve” in what appeared to be pressure for quicker policy normalization.
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