Amid growing expectations of an additional BOJ rate hike, the 2-year government bond yield rose close to 2%, partly due to the US-Japan interest rate differential. Markets are increasingly pricing in an acceleration of future rate hikes.
In the bond market, expectations for an additional BOJ rate hike strengthened, and the 2-year government bond yield temporarily rose 4 basis points from the previous business day to 1.975%. The 5-year government bond yield reached a record high of 2.43%.
The BOJ decided to raise rates at this month's monetary policy meeting, as the market expected, but Governor Kazuo Ueda did not provide clear clues about the pace of future tightening, raising concerns in the market that the BOJ is falling behind in addressing inflation.
In the OIS market, pricing for an October rate hike advanced to approximately 40%, and an additional rate hike by December is now fully priced in. Yen weakness against the US dollar has also been cited as a factor increasing the need for monetary tightening.
Some analyses indicate that trades assuming an acceleration in BOJ rate hikes are prevailing, given domestic and international political conditions, fiscal expansion and higher resource prices.