Japan Economic & Financial Weekly

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JGB yield and yield curve scenarios for June and FY24-FY26

The 10-year JGB yield pauses its ascent in June but is reluctant to decline. Between now and the Policy Board meeting on June 13-14, it tests the upside on concerns about an official decision to reduce the BoJ’s bond purchases or early additional rate hikes. But if the Bank responds by revealing details of its plans for dialing back purchases and opts not to raise rates, the 10-year yield puts in a top on a sense the worst is over and heads lower once dip-buyers appear. That said, it finds support on renewed worries if the minutes of the April 25-26 Policy Board meeting (Jun 19) and the Summary of Opinions for the June 13-14 meeting (Jun24) reveal a hawkish tone. Expectations of a September start to Fed rate cuts are rekindled if the May US payrolls report (Jun 7) and CPI report (Jun 12) both point to diminished inflationary pressures, sending the 10-year UST yield lower and weighing on the 10-year JGB yield as well. The 30-year JGB yield trades at a level that keeps the 10s30s JGB spread at around 110bp.