Japanese government bond yields have reached their highest level in 30 years, with the 10-year yield approaching 2.93%. Against a backdrop of mounting inflationary pressure from the weaker yen and rising energy prices, markets are increasingly pricing in a Bank of Japan rate hike.
On 17 August, Japanese government bond yields rose sharply, with the 10-year yield reaching 2.93% and approaching its highest level since 1996. The 2-year yield also rose to its highest level since 1995, while the level of the 30-year yield drew attention.
The rise reflects both the stronger inflationary pressure caused by the weaker yen and surging energy prices, and growing market expectations that the Bank of Japan will move to raise interest rates soon.
Market participants are putting the probability of a rate hike at the September monetary policy meeting at close to 80%, even though the Japanese economy recorded weaker-than-expected growth in the second quarter.