BOJ Faces Bond Market Pressure Amid Rising Yields

The Bank of Japan (BOJ) may be nearing an interest rate hike, but it faces growing pressure to support the bond market amid rising yields.

Prime Minister Sanae Takaichi's expansive fiscal agenda has driven up Japanese government bond yields, making borrowing more expensive for a country with the developed world's heaviest debt burden.

Takaichi has pledged to enhance communication with markets to preserve confidence in Japan's finances and has urged BOJ Governor Kazuo Ueda to buy more bonds when necessary to curb rises in long-term rates.

However, analysts say that demanding the BOJ to buy bonds would backfire by stoking concerns over fiscal dominance and casting doubt on the central bank's ability to combat inflation.