Japan 10-year government bond yield rises 1.5bps to 1.535%

Japan 10-year government bond yield rises 1.5bps to 1.535%

Japan's 10-year government bond yield rose to 1.535% on Thursday, July 2, 2025, following a series of weaker-than-expected trade data and market concerns [1]. This increase, which marks a 1.5 basis points (bps) rise from the previous day's yield, reflects growing investor concerns over Japan's economic outlook and fiscal policy.

The trade surplus shrank to JPY 153.1 billion in June 2025, down from JPY 221.3 billion in June 2024 and well below the forecasted JPY 353.9 billion [1]. Exports fell 0.5% year-on-year to JPY 9,162.6 billion, marking a second consecutive monthly decline and missing expectations for a 0.5% rise. This weakness in exports has heightened concerns that Japan’s economy may contract in Q2, potentially pushing it into a technical recession [1].

Imports inched up 0.2% to JPY 9,009.5 billion, defying expectations for a 1.6% drop and marking the first increase in three months [1]. 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 [3].

Investors are now turning their attention to the upcoming Upper House election on July 20, amid growing speculation that the government may unveil new fiscal stimulus measures, including increased public spending or even a cut to the consumption tax, in a bid to spur growth [1].

The yield on the benchmark 10-year Japanese government bond rose to nearly a 17-year high on Tuesday morning, reaching 1.595% [2]. This increase is driven by fears of worsening finances if the government ramps up spending to help the economy. Long-term yields have a significant impact on people's daily lives, including higher interest rates on deposits and housing loans [2].

The 10-year yield has been climbing steadily since early July, with the yield on July 1 being below 1.4% [2]. This trend reflects growing concerns about Japan's fiscal situation following the July 20 Upper House election.

In summary, the rise in Japan's 10-year government bond yield to 1.535% reflects investor concerns over the country's economic outlook and fiscal policy, driven by weaker trade data and market fears of increased government spending.

References:
[1] https://www.tradingview.com/news/te_news:470751:0-japan-10-year-yield-rises-after-weak-trade-data/
[2] https://www3.nhk.or.jp/nhkworld/en/news/20250715_B81/
[3] https://www.tradingview.com/news/te_news:471075:0-japan-10-year-yield-on-3-day-decline/