Japan’s 10-year yield at over four-month high on hawkish BOJ bets
JAPAN’S 10-year government bond (JGB) yield scaled its highest in 4½ months on Friday (Jul 14) amid speculation that the Bank of Japan (BOJ) would tweak its ultra-loose monetary policy this month.
The 10-year JGB yield touched 0.485 per cent, its highest since Mar 10. By midday break, the yield slipped to 0.480 per cent, but still up 1.5 basis points (bps) from the previous session.
“Japan’s yields rose across the curve despite declines in the US Treasury yields overnight. So, there must be catalysts that are unique to Japan,” said Keisuke Tsuruta, fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.
Benchmark 10-year Treasury yields fell to a two-week low, and two-year yields were the lowest since mid-June overnight, as inflation moderated, boosting bets that the Federal Reserve will stop hiking interest rates after an expected 25-basis-point hike later this month.
Japan’s 10-year bond yield started climbing sharply since Friday last week, underpinned by strong growth of Japan’s base salary, which soared 1.8 per cent year-on-year in May, the biggest increase since February 1995.
Wage growth and sticky inflation are key factors on the BOJ’s radar as the central bank considers if and when it should unwind its ultra-loose monetary stimulus.
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Japan’s Yomiuri newspaper reported on Friday the BOJ is likely to raise its price projection for this fiscal year to between 2 per cent and 2.9 per cent in its quarterly projections.
The BOJ is scheduled to have a two-day policy meeting starting Jul 27.
The 20-year JGB yield jumped 3 bps to 1.120 per cent and the 30-year JGB yield climbed 3 bps to 1.380 per cent.
The five-year yield rose 1 bp to 0.135 per cent.
The 40-year JGB yield was flat at 1.500 per cent.
The two-year JGB yield was flat at -0.040 per cent. REUTERS
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