TOKYO: Japan’s two-year government bond yield hit its highest level in 13 years on Friday after the Bank of Japan’s (BOJ) chief signalled the chance of another rate hike in an interview with local media.
BOJ Governor Kazuo Ueda said the central bank could “respond with monetary policy” if yen declines affect the country’s inflation and wages in ways that are hard to ignore, the Asahi newspaper reported on Friday.
The two-year JGB yield, highly sensitive to the BOJ’s policy, rose 2 basis points (bps) to 0.21%, its highest level since April 2011.
The five-year JGB yield rose 1.5 bps to 0.385%, its highest since March 26.
“The comments of Ueda in the newspaper interview moved the yields higher,” said Naoya Hasegawa, chief bond strategist at Okasan Securities.
“The market expect the policy rate will rise to 0.25% around October but there has not been any signs from BOJ about the timing. In the interview, Ueda hinted the timing for the rate hike.”
According to the newspaper, Ueda said inflation will likely accelerate “from summer towards autumn” as this year’s bumper pay raises in annual wage negotiations push up prices.
Japan’s 10-year bond yield inches down as BOJ keeps bond buying amount intact
The BOJ last month ended its negative rate policy and hiked rates for the first time in 17 years. It set the overnight call rate as its new policy rate and decided to guide it in a range of 0-0.1%.
If the BOJ raises the policy rate to 0.25% this year, the two-year JGB yield trading below 0.2% can’t be justified, said Okasan Securities’ Hasegawa.
Yields on longer-dated bonds were flat, with the 10-year JGB yield at 0.775%.
The 20-year JGB yield was flat at 1.540% and the 30-year JGB yield was steady at 1.810%.
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