Japan's economy picking up

The world's third largest economy is picking up as the demand in the neighbouring countries improves, but still remains weak within the country, the Bank of Japan said during its monthly policy meeting. The BoJ has not introduced any shifts to its monetary policy, meeting analysts' expectations. Japan's gross domestic product expanded 3.5% last quarter, however improvement in increasing exports and boosting corporate investment and wages has lagged. The sharp drop in the Yen helped stabilize exports, which surged 3.8% in April from a year earlier, but it is also accentuating increasing import costs. Haruhiko Kuroda has made a recovery of the nation's export industries a priority of his administration and there are already signs of improvement, however longer-term structural reforms are needed to boost Japan's international competitiveness. The fact the yields on Japanese 10-year bonds touched 1% for the first time in a year is posing certain risks to the recovery. 

"The level of benchmark yields is still in a low range historically, however, the pace of the rise in yields is too rapid," said Soichi Okuda, chief economist at Sumitomo Shoji Research Institute in Tokyo. "Given the recent gains in bond yields, market participants are interpreting that the BOJ is accepting a rise in bond yields to some extent."