Japan's Two-Year Government Bond Yield Approaches 2%, Rate Hike Bets Heat Up

On September 28, Japan's two-year government bond yield approached the key 2% level as investors increased their bets on further interest rate hikes by the Bank of Japan. The yield rose by 4 basis points to 1.975% on Monday, marking the highest level since 1995. Other maturities of Japanese government bonds also faced pressure, with the five-year bond yield rising by 3 basis points to 2.43%. SMBC Nikko Securities strategist Nakamura noted in a report that as domestic and foreign political figures focus on the weak yen, bets on the Bank of Japan accelerating its tightening policy are gradually heating up. They stated that fiscal expansion in major economies and rising commodity prices could further strengthen market expectations for Japan to tighten its monetary policy to curb inflation.

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