BOJ Rate Hike Bets Fuel Sharp Rise in JGB Yields

Japanese government bond yields rose sharply on Friday as investors bet that the Bank of Japan will raise interest rates sooner rather than later.

The two-year yield, which is most sensitive to BOJ's policy rates, jumped 2 basis points to 1.51%, its highest level since May 1995.

This rise in yields was fueled by a weak yen and rising oil prices, which have accelerated inflation worries.

Rinto Maruyama, senior strategist for FX and Rates at SMBC Nikko Securities, warned that market expectations for a rate hike in October might be too high.

The BOJ needs more time to review the effects of its June rate hike on the economy, such as higher rates on corporate lending, Maruyama said.