JGB yields hit 17-year highs, yen gains as BOJ signals December rate hike

TOKYO: Japanese government bond (JGB) yields hit 17-year highs and the yen strengthened on Monday, as Bank of Japan Governor Kazuo Ueda’s comments fuelled bets that the central bank could hike interest rates as early as this month.

The two-year JGB yield, the most sensitive to the BOJ’s policy rate, rose 2 basis points (bps) to 1.01%, its highest level since June 2008.

The five-year yield rose 4 bps to 1.350% and the 10-year JGB yield jumped 4.5 bps to 1.845%, their highest levels since June 2008.

“We saw some signs from Ueda’s speech that the BOJ wants to raise rates in December, and Ueda issued those messages to avoid stock markets to tank when the central bank raises rates,” said Takashi Fujiwara, chief fund manager at Resona Asset Management’s fixed income investment division.

In a speech to business leaders in Nagoya of central Japan, Ueda said the central bank was “actively” collecting information on corporate wages through its head office and branches.

“Ueda tried to confirm that wages are rising, and he said this in Nagoya, home to Toyota Motor and other auto parts firms. That is very meaningful,” said Fujiwara.

JGB yields have been under upward pressure across the curve, with growing bets of a BOJ rate hike amid recent declines in the yen.

A weakening yen typically increases import costs, raising prices in Japan.

The yen gained as much as 0.4% to 155.53 against the dollar as Ueda spoke.

The market also weighed the size of Prime Minister Sanae Takaichi’s stimulus plan, which has sent yields on longer-dated bonds to record highs recently.

The 20-year JGB yield rose 3 bps to 2.855%. The 30-year JGB yield rose 5 bps to o 3.385%.