Japan bond yields rise on faster BOJ rate hike bets, inflation concerns

Business Recorder reported that Japanese government bond yields climbed on Wednesday as investors increasingly bet that the Bank of Japan will lift rates next month. Crude oil firmed on fresh uncertainty in the Middle East, adding to inflation worries. Attention also turned to US consumer price data due later that day, which could offer signals on Federal Reserve rate direction.

The 10-year yield gained 4.5 basis points to 2.850%, while the 5-year rate advanced 2.5 basis points to 2.110%, a record. The 2-year yield, which reacts most to BOJ policy, climbed 3.5 basis points to 1.645%, its loftiest level since May 1995. Bond yields and prices move in opposite directions.

Traders now see a growing chance of another hike in September rather than December, six months after the June increase. The change followed a joint Japan-US currency intervention to prop up the yen and a July policy meeting summary that many read as hawkish. Tokyo Tanshi data put the odds of a September move at 78% by Tuesday midday, versus 66% the previous afternoon. Barclays chief Japan economist Naohiko Baba said the summary suggested policymakers were positive about a September hike.