The Bank of Japan has issued a clear signal for interest rate hikes, causing government bond yields across various maturities to hit new highs.

The Japanese government bond market is experiencing significant volatility, with the two-year government bond yield rising to 1.025% today, the highest level since June 2008;

At the same time, the 20-year yield rose to 2.874%, reaching a new high since November 2020. This comprehensive upward shift in the yield curve reflects the market's strong expectations for a shift in Japan's monetary policy.

The key factor driving this market expectation comes from the latest statements by the Bank of Japan. The Governor of the Bank of Japan signaled an interest rate hike last week, indicating that the Japanese economy has entered a moderate recovery track, and the trend of rising wages and prices is strengthening.

He emphasized that the inflation rate is expected to briefly fall below 2% in the early part of the 2026 fiscal year before accelerating again and stabilizing near the Central Bank's target in the latter half of the outlook period.

The governor's statement signifies a potential major shift in the policy framework of the Bank of Japan. He candidly stated that the impact of exchange rates on prices is increasing, and to achieve the price stability target, the Central Bank will "adjust its easing policy in a timely manner."

This wording has been interpreted by the market as Japan is about to bid farewell to its long-implemented ultra-loose monetary policy, and if the economic and price situation continues to improve, the Central Bank will consider further raising interest rates.

In summary, the rise in yields corroborates the policy signals released by the Central Bank, indicating that Japan is gradually overcoming the deflationary mindset that has persisted for decades.

Financial market participants are closely monitoring the subsequent actions of the Bank of Japan, which is not only an important turning point for Japanese monetary policy but may also have far-reaching effects on the global capital flow landscape.

#日本国债 #Japan Central Bank