Japan 10-Year Yield Slips on Market Caution

Japan’s 10-year government bond yield edged down to around 1.59% on Friday, snapping a two-day advance as investors reassessed the implications of the US-Japan trade deal and broader policy outlook. The agreement imposes a 15% tariff on Japanese exports to the US, significantly lower than the 25% previously threatened by President Donald Trump, providing some relief but keeping trade-related uncertainty elevated. On the data front, Tokyo’s core inflation in July came in below expectations but remained well above the Bank of Japan’s 2% target, reinforcing market expectations for another rate hike this year. The BOJ will announce its policy decision next week and is widely expected to keep rates steady, but will likely revise up its inflation forecast in its quarterly outlook. Earlier this week, Deputy Governor Shinichi Uchida signaled a cautious stance on further tightening, citing heightened uncertainty over global trade policy and its potential drag on growth.