Japan’s 10-year bond yield hits 1999 high as BOJ hikes rates; tech leads Nikkei rally

TOKYO: Japan’s 10-year government bond yield jumped to a 26-year peak on Friday after the Bank of Japan raised interest rates to a three-decade high and signalled more policy tightening.

The Nikkei share average rose, led by gains in artificial intelligence-linked stocks after US peers rallied overnight.

The 10-year yield extended an earlier rise to climb as much as 5 basis points (bps) to 2.015%, the highest since August 1999.

The 2% mark acted as a symbolic ceiling during Japan’s decades-long struggle with deflation.

Ten-year JGB futures fell as much as 0.5 yen to 132.84 yen, the lowest since June 2008.

Bond prices move inversely to yields.

The yen extended declines to fall as much as 0.4% to 155.52 yen per US dollar.

The Nikkei mostly held onto its earlier gains after the BOJ’s policy announcement, and was up 0.9% at 49,437.76, as of 0452 GMT.

The broader Topix rose 0.7% to 3,379.64.

In a widely expected move, the BOJ raised short-term interest rates to 0.75% from 0.5% in the first increase since January.

The central bank said there was a “high chance” for sustained rises in wages and inflation.

“The BOJ seems more upbeat on the economy and prospects for securing 2% inflation sustainably,” said Tom Kenny, senior international economist at ANZ.

“This points to further tightening from the BOJ.”

The two-year JGB yield, which tends to be the most sensitive to monetary policy expectations, climbed 2 bps to 1.085%, the highest since June 2007.

The five-year yield added 4.5 bps to 1.475%, a level last seen in June 2008.

At the longer end, 20-year yields gained 3 bps to a record 2.965%. The 30-year yield climbed 2.5 bps to 3.4%.