Home / Business and Economy / Japan Yields Break 2% Barrier After BOJ Rate Hike
Japan Yields Break 2% Barrier After BOJ Rate Hike
19 Dec
Summary
- 10-year JGB yield surpassed 2%, a significant break from decades of low rates.
- Bank of Japan raised its key policy rate to a 30-year high of 0.75%.
- The yen strengthened against the dollar following the central bank's tightening signal.
The benchmark 10-year Japanese government bond (JGB) yield has broken through the 2% threshold, settling at 2.015% – its highest point since August 1999. This pivotal moment signifies a potential end to Japan's prolonged battle with deflation and a departure from the era of ultra-loose monetary policy. The yield's ascent was catalyzed by the Bank of Japan's recent quarter-point rate hike, bringing the key policy rate to a three-decade high of 0.75%.
The Bank of Japan's move, while anticipated, was accompanied by signals of continued policy normalization. This has accelerated an upward trend in JGB yields, which began in early November amid speculation about government stimulus. Earlier in December, the BOJ Governor's strong indication of impending rate hikes further fueled market expectations. Historically, the 10-year JGB yield has remained below 2% since 1999, with a very brief exception in May 2006.
Analysts note the BOJ must now carefully manage inflation risks as the government prepares significant fiscal stimulus. Despite lingering growth concerns, the central bank's pace of rate hikes is expected to be calibrated. The yen also saw a notable rise against the dollar, strengthening by nearly 1.2% and reaching its highest point in a month, as the market reacted to the tightening monetary stance.
