Japanese 10-Year Bond Yield Surpasses 0.7% for First Time in 9 Years 8 Months... Impact of Ueda's Hawkish Remarks

Japan's 10-year government bond yield surpassed 0.7% on the 11th, marking the highest level in about 9 years and 8 months.

[Image source=Yonhap News]

On that day, in the Tokyo bond market, the yield on newly issued 10-year government bonds by the Japanese government rose to 0.7% at one point during trading, reaching the highest level since January 2014.

Japan's 10-year government bond yield has been fluctuating around 0.6% and maintaining a high level since the BOJ effectively raised the upper limit of long-term interest rate fluctuations to 1% in July.

It is analyzed that an interview with Kazuo Ueda, Governor of the Bank of Japan (BOJ), influenced the rise in yields. In an interview with the Yomiuri Shimbun released on the 9th, Governor Ueda stated that once inflation reaches a stage where the BOJ can be confident of achieving its 2% target stably, lifting the negative interest rate could be considered as one of several options. Since 2016, Japan has maintained short-term interest rates at -0.10% as part of a decade-long large-scale monetary easing policy.

The Nihon Keizai Shimbun explained that the market interpreted Governor Ueda's remarks hawkishly, sparking expectations that the BOJ would bring its monetary easing policy to an end. Takashi Yamawaki, head of the bond research department at JP Morgan Securities, said, "It seems that more investors are predicting that Japan will exit the negative interest rate earlier than expected."

The market anticipates the timing of the monetary policy shift to be between April and June next year. Financial information service Quick reported, "29% of market participants expect the BOJ to change its policy between April and June, after the spring wage negotiations."

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