BOJ Rate Hike Bets Push Japan's Two-Year Bond Yield Near Key Threshold

Japan's two-year government bond yield rose to its highest level since 1995 on Monday, September 28, as investors bet that the Bank of Japan (BOJ) will raise interest rates again. The two-year yield reached 1.975%, a four-basis-point increase from the previous day.

The five-year yield also climbed three basis points to 2.43%, indicating selling pressure across the Japanese bond market. This move comes after BOJ Governor Kazuo Ueda offered limited guidance on future rate increases following the central bank's widely expected hike earlier this month.

Investors are concerned that the BOJ may be moving too slowly, particularly as a hawkish US Federal Reserve threatens to keep the interest-rate gap between the US and Japan wide. According to a Bloomberg report, Kazuo Momma, a former BOJ executive director responsible for monetary policy, said the central bank could raise its benchmark rate again in October.