JPY Intraday Comment: Japan’s economic risks fall while inflation and bond yields build

Research evidence excerpt

JPY Intraday Comment: Japan’s economic risks fall while inflation and bond yields build

Nomura | JPY Intraday Comment 9 July 2026

constraintconcerns,wereconfirmedtohaverecoveredasofMay, and the risk that the

Japanese economy will suffer from severe supply constraints is likely diminishing (Fig.1).

The report also mentioned positive factors such as stronger demand related to AI, solid

sales of high-priced goods supported by stock market gains and increased sales of air

conditioners and automobiles following regulatory and tax changes.

By contrast, rising energy and raw material prices are accelerating inflation, and more

companies are reportedly considering raising prices for food and daily necessities,

according to the Sakura Report. Overall, the report is consistent with the BOJ’s June

meeting view that downside risks to the economy have diminished, while upside risks to

inflation have increased. Including the unexpected improvement in business sentiment in

the June BOJ Tankan survey, the fundamentals suggest conditions remain supportive of

continued BOJ rate hikes.

Expanding global demand related to AI is also likely to support JPY through increased

Japanese exports (Fig.2). In the short term, there are concerns that a recovery in import

volumes of energy and other goods could worsen the trade balance, and there is also a

need to watch for whether the US attacks on Iran will be resolved quickly. However, from

year-end into next year, momentum toward a sustained Japanese trade surplus is likely to

strengthen.

If the 10yr JGB yield rises above 3%, will government concerns intensify further?

The 10yr JGB yield briefly rose to 2.9%, and as upward pressure on yields strengthens

globally due to higher oil prices, pressure for a steeper Japanese yield curve also remains