TOKYO: Japan’s 10-year government bond yield jumped to a three-week high on Friday amid growing speculation that the Bank of Japan (BOJ) would end its ultra-low interest rate policy soon.
The 10-year JGB yield climbed as high as 5 basis points (bps) to 0.8%, its highest since Nov. 16, following a 10.5 bps jump in the previous session, its biggest single-session increase since April 2013.
BOJ Governor Kazuo Ueda said on Thursday the central bank anticipates an “even more challenging” situation in the year-end and the beginning of next year.
“Ueda said there is a challenge at the end of the year, which drove a speculation that the BOJ may end its negative rate policy at its meeting later in the month,” said Katsutoshi Inadome, senior strategist at Sumitomo Mitsui Trust Asset Management.
His comments come as some economists and strategists expect the BOJ to end its ultra-low interest rate policy as early as January, with inflation exceeding the central bank’s 2% target for well over a year.
Ueda visited Prime Minister Fumio Kishida after he made the remarks, which helped the yen surge to a multi-month high against the dollar, extending its rally on Friday.
JGB yields rise from multi-month lows after weak 30-year bond auction
Meanwhile, the market was disappointed as the BOJ maintained the same amounts for regular bond buying on Friday, said Inadome at Sumitomo Mitsui Trust.
The BOJ has been reducing the amounts for its regular bond buying operations across the curve as yields fell sharply until earlier this week to track US Treasury yields.
The 10-year JGB yield was last at 0.790%, up 4 bps from the previous session.
Meanwhile, the 5-year JGB yield jumped 3.5 bps to 0.375% and the 20-year JGB yield rose to as high as 1.569%, their highest since Nov. 14.
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