Against the backdrop of further rate hikes and rising long-term yields since the Bank of Japan lifted its negative-rate policy, a divergence between rising stocks and falling core CPI has emerged. An investment strategy of buying Japanese government bonds on declines is presented, with practical proposals for staggered purchases while keeping an eye on US inflation and downward pressure on the yen.
The Bank of Japan lifted its negative-rate policy in March 2024 and subsequently shifted to a framework maintaining the policy rate at around 0–0.1%. Rate hikes then proceeded in stages, with the policy rate reaching 1.25% as of September 2026.
Long-term yields also rose. Japan's 10-year government bond yield increased from 0.727% to 3.111%, while the 20-year yield rose from 1.497% to 3.940%. Both reached their highest levels in roughly 30 years.
Core CPI has been declining since peaking at 3.7% in May 2025, falling to 1.7% in August 2026. By contrast, TOPIX continued to rise despite the prolonged period of rate hikes, highlighting a divergence between stock prices and price indicators.
Some observers have pointed to the possibility that US inflation could drive Japan's policy rate higher. Interest-rate differentials between Japan and the US and downward pressure on the yen could affect future monetary-policy decisions.