Japan Economic & Financial Weekly

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Trump 2.0, rate hike speculation, and fiscal policy fears pose threats to JGB market     

The 10-year JGB yield trades with an upward bias this week. The decline in the yen that followed the post-election rise in US bond yields leads to continued speculation of an early BoJ rate hike. Governor Kazuo Ueda will address a meeting of business leaders in Nagoya on November 18 and participate in an online event sponsored by Paris Europlace on November 21. The 10-year JGB yield rises if his comments at either event point to an increased likelihood of an early rate increase. Corrective pressures ahead of the 20-year JGB offering on November 21 also weigh on the market. However, dip-buyers step in to halt the advance in yields if the 10-year yield approaches its FY24 high of around 1.100%. The benchmark long-term yield declines if Mr. Ueda's remarks do not foreshadow an early rate hike, but the downside is limited due to persistent concerns about an early rate hike. The 30-year JGB yield trades with an upward bias due in part to lingering worries about loose fiscal policy.