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JGB yields rise sharply as weak yen fuels bets for BOJ rate hike
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JGB yields rise sharply as weak yen fuels bets for BOJ rate hike
Jul 23, 2026 8:54 PM

TOKYO, July 24 (Reuters) - Japanese government bond yields

rose sharply on Friday as the weak yen and rising oil prices

fuelled bets that the Bank of Japan would raise its interest

rates earlier.

The two-year yield, most sensitive to BOJ's

policy rates, rose 2 basis points to 1.51%, its highest level

since May 1995.

The 30-year yield, which reflects inflation

worries, rose to as high as 4%, its highest since July 9, and

was last up 6.5 bps at 3.980%.

Prospects for a rate hike at the BOJ's policy meeting in October

have increased after a Bloomberg News report that said BOJ

officials were open to raising interest rates at a faster pace

than the consensus among economists.

The two-year bond yield has risen 8 bps this week, its

sharpest weekly jump since mid May.

"The market expectations for the October rate hike might be

too high," said Rinto Maruyama, senior strategist for FX and

Rates at SMBC Nikko Securities.

"The central bank needs more time to review the effects of

its June rate hike on the economy, such as on higher rates on

corporate lending," said Maruyama.

The Bloomberg report, which did not cite anyone, came after

the yen fell to an almost four-decade low against the U.S.

dollar, raising concerns on import costs and accelerating

inflation.

The BOJ is concerned about the weak yen and its impact on

prices, and it would turn hawkish to reverse the trend when

necessary, said Maruyama.

But such messages would come from public speeches by BOJ top

officials or board members, he said.

On Friday, super-long ends sold off more heavily on growing

inflation worries after oil prices settled above $100 overnight,

steepening the yield curve.

Market players might have sold super-long bonds after the

yield curve flattened in the previous session, said Katsutoshi

Inadome, senior strategist at Sumitomo Mitsui Trust Asset

Management.

The rise in yields on two- and five-year bonds was capped until

recently as their yields had priced in the BOJ's future rate

hike path.

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