The yield on Japan’s 10-year JGB increases on reports of an imminent BOJ policy shift.
Friday marked a three-week peak for the yield on 10-year Japanese government bonds, as speculation increased that the Bank of Japan (BOJ) would shortly abandon its ultra-low interest rate policy.
The yield on Japan’s 10-year JGB increases on reports of an imminent BOJ policy shift. The 10-year JGB yield peaked at 0.8%, an increase of 5 basis points (bps), its highest level since November 16. This followed a previous session surge of 10.5 bps, the most significant single-session increase since April 2013.
The BOJ anticipates an “even more challenging” circumstance at the end of the year and the start of the following year, according to Governor Kazuo Ueda of the BOJ on Thursday.
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“Ueda’s statement that the end of the year will be difficult to navigate sparked speculation that the BOJ might abandon its negative interest rate policy at its meeting later this month,” according to Katsutoshi Inadome, senior strategist at Sumitomo Mitsui Trust Asset Management.
As inflation has surpassed the central bank’s 2% objective for over a year, some economists and strategists anticipate that the BOJ will abandon its ultra-low interest rate policy as early as January. His remarks coincide with this anticipation.
Following his remarks, Ueda visited Prime Minister Fumio Kishida, which aided the yen’s ascent to a multi-month high against the dollar on Friday and further propelled its rally.
In the interim, the market was dissatisfied that the BOJ maintained its regular bond purchase quantities on Friday, according to Inadome of Sumitomo Mitsui Trust.
To follow US Treasury yields, the BOJ has been reducing the quantities allocated to its routine bond purchasing operations across the yield curve since yields fell significantly until earlier this week.
As of the close of trading, the 10-year JGB yield was 0.790%, an increase of 4 basis points from the previous session.
In contrast, the yield on 5-year JGBs increased by 3.5 basis points to 0.375%, and the yield on 20-year JGBs peaked at 1.569%, its highest level since November 14.
