BOJ Rate Hike Bets Drive Japanese JGB Yields to Three Decade Highs

Japan's short-term government bond yields surged to their highest level in over three decades on Thursday, as investors increasingly bet that the Bank of Japan (BOJ) will raise interest rates this week.

The 2-year JGB yield jumped to 1.865%, a level not seen since April 1995, following higher equivalent U.S. Treasury yields after the Federal Reserve's latest policy tightening. Market expectations suggest the BOJ will increase its key rate by 25 basis points to 1.25% on Friday.

Investors are closely watching the BOJ's guidance on further monetary policy normalization, particularly as it may impact the Japanese yen. The dollar-yen exchange rate rebounded sharply overnight following the Fed's hawkish stance.