Stories
Japan's 2-Year Bond Yield Nears 2% Amid BOJ Rate Hike Bets
- •Japan's two-year government bond yield approached 2%, reaching 1.975% on Monday, September 28, its highest since 1995, driven by investor expectations of further Bank of Japan (BOJ) rate hikes.
- •The five-year yield also rose to 2.43%, indicating widespread selling pressure across the Japanese bond market.
- •Investors are concerned the BOJ may be tightening monetary policy too slowly, especially with a hawkish US Federal Reserve maintaining a wide interest-rate gap.
- •Former BOJ executive director Kazuo Momma suggested a potential October rate hike, which would be the second consecutive monthly increase and earlier than many economists anticipated.
- •Pressure for tighter monetary policy is also stemming from the weak yen, which depreciated to 157.70 per dollar in early Asian trading.
Key Questions Answered
Japan's two-year government bond yield moved closer to 2% as investors increased bets that the Bank of Japan (BOJ) would raise interest rates again, driven by expectations for faster monetary tightening. The yield rose to 1.975% on Monday, September 28, reaching its highest level since 1995.
According to former BOJ executive director Kazuo Momma, the central bank could raise its benchmark rate again in October. This would mark a second consecutive monthly increase, and overnight index swaps have priced in a 40% chance for an October hike.
The weak yen, which recently traded at 157.70 per dollar, has intensified pressure for tighter monetary policy as policymakers increasingly focus on the currency's depreciation. Analysts note that trades favoring faster BOJ tightening are gaining traction due to these currency concerns, fiscal expansion, and higher commodity prices.
