Key Points
- Japan’s two-year bond yield hit 0.47%, the highest in 16 years.
- Expectations for a Bank of Japan interest rate hike increased after strong comments from officials.
- The BOJ’s chief hinted at a possible policy shift sooner than expected.
- Other government bond yields also went up, with the five-year yield reaching 0.605%.
Looma News
Japan’s two-year government bond yield jumped to 0.47% on Friday, the highest level since December 2008. This rise follows growing speculation about a potential interest rate hike by the Bank of Japan (BOJ), sparked by comments from the central bank’s governor, Kazuo Ueda.
On Thursday, the BOJ decided to keep its ultra-low interest rates but acknowledged that risks related to the US economy are easing. This shift in tone has led analysts to think conditions are becoming right for a rate increase.
Naoya Hasegawa, chief bond strategist at Okasan Securities, noted, “Ueda’s comments and the context around them fueled speculation that the BOJ might raise its policy rate sooner than expected.” Earlier this year, after a rate hike in July, the BOJ mentioned it would take its time to assess risks before making any policy changes. However, Ueda’s recent statements suggest a move away from that cautious approach, indicating a possible adjustment by December.
On Thursday, market reactions were mixed to the BOJ’s quarterly report, which stressed the need to keep an eye on overseas economic conditions, especially in the US. As a result, bond yields fluctuated.
Alongside the two-year bond, the five-year JGB yield increased to 0.605%, the highest since August 2. The ten-year yield went up by 1.5 basis points to 0.95%. Meanwhile, the 20-year yield edged up by 1 basis point to 1.785%, while the 30-year and 40-year yields stayed the same at 2.205% and 2.545%, respectively.
