BOJ Rate Hike Bets Push Japanese Yields Higher

The yield on Japan's 10-year government bond rose to around 2.89% on Monday, as markets priced in an increased likelihood of a September rate hike by the Bank of Japan.

Expectations for a policy move have grown significantly since the BOJ's July meeting, with markets now pricing an approximately 82% probability of a September increase, up sharply from about 23% previously.

Deputy Governor Ryozo Himino is set to speak on Thursday, and investors are looking for further signals on the timing and pace of policy tightening.

The persistent inflation pressures and concerns over Japan's fiscal outlook have contributed to upward pressure on long-term yields, with some analysts suggesting that the Finance Ministry may raise the assumed interest rate for calculating debt-servicing costs to 3.8% for fiscal 2027, from 3% in the current budget.