Long-term interest rate surges to 2.81%, highest in 29 years, accelerating government bond sell-off on fiscal deterioration concerns

Long-term interest rate surges to 2.81%, highest in 29 years, on fiscal concerns The yield on the new 10-year Japanese government bond temporarily rose to 2.810%. The market warns against the Takaichi administration's expansionary fiscal policy and the BOJ's restraint under the 'Basic Policy.' Finance Minister Katayama emphasized 'responsible active fiscal policy,' but Chief Cabinet Secretary Kihara said they are 'watching with extremely high tension.' 1234

Spring wage negotiations achieve 5.01% raise, over 5% for third consecutive year, small firms also exceed According to the final tally by Rengo (Japanese Trade Union Confederation), the average wage increase rate was 5.01% (monthly amount of 16,400 yen). Small and medium enterprises also saw 4.69%, exceeding the previous year, supporting expectations of additional BOJ rate hikes. 567

BOJ's version of output gap positive for 17th consecutive quarter The output gap for the January-March quarter was +0.53%, with demand continuing to exceed supply. The potential growth rate also rose to 0.69%, supporting continued BOJ rate hikes. 8

Nikkei average rebounds by 1,010 yen on buybacks of AI-related stocks After dropping more than 1,100 yen at one point due to the previous day's decline in US tech stocks, the market sharply rebounded on dip-buying and news of Kioxia's new memory shipments. The closing price was 69,744 yen, rising over the week. 91011

June services PMI revised to 52.2, driven by domestic demand New business expanded at the fastest pace in nearly two years, but business confidence was subdued due to rising costs and Middle East tensions. Employment expanded, and hiring continued. 12

Government aims to revive 'animal spirits' with $2.3 trillion plan The Minister of State for Economic and Fiscal Policy announced an investment plan of over 370 trillion yen in 17 strategic fields including AI, through public-private partnerships. Aiming for growth through expansionary fiscal policy including consumption tax cuts, but the market is wary of fiscal deterioration. 13