BOJ Rate Hike Expectations Spark Japanese Bond Yield Surge

Japan's 10-year government bond yield surged to its highest level since 1996 on Monday, reaching 2.93% amidst growing expectations of an imminent Bank of Japan interest rate hike.

The unexpected move comes despite weaker-than-expected GDP data, which showed Japan's economy expanded at an annualized 1.1% in Q2, below market expectations of 2%, as weak domestic demand offset strong exports.

The BOJ is facing mounting inflationary pressures, with persistent yen weakness adding to the pressure. Traders are speculating that the central bank could raise rates as soon as September after a growing number of policymakers called for a stronger response.