Japan Equities Surge on Rising Yields and Weaker Yen

The MSCI Japan Index has outperformed the MSCI Kokusai Index by 16.4% since early 2025, driven by rising domestic bond yields and a weaker yen.

The 10-year Japanese government bond yield stands at 2.94%, its highest level since September 1996, while the Bank of Japan policy rate is at 1.25%, the highest since 1995.

Japanese financials have benefited from higher net interest margins after the BOJ ended negative rates and yield curve control in 2024.