BOJ Board Member Calls for Unconventional Rate Hikes Amid Inflation Fears

Japanese government bonds (JGBs) took another hit on Wednesday as hawkish Bank of Japan (BOJ) board member Hajime Takata called for faster-paced interest rate hikes. The 5-year bond yield jumped to a record high of 2.295%, up 4 basis points, while the 2-year JGB yield rose to 1.84%, its highest since April 1995.

Takata's comments on Wednesday indicated that the BOJ will raise policy rates this month and continue to do so at an unconventional pace. He was the sole dissenter to the BOJ's decision in July to keep short-term interest rates steady at 1%, advocating for a rate hike to 1.25% to address inflationary risks.

The JGB yields are on the rise alongside global peers, reflecting investor concerns over inflation and government debt levels that could inflict fresh pain on consumers and businesses.

Takashi Fujiwara, chief fund manager at Resona Asset Management's fixed income investment division, noted that Japan may boost sales of two- and five-year bonds due to Prime Minister Sanae Takaichi's aggressive spending plans. This would add upward pressure on the 10-year bond yield.