BOJ Rate Hike Speculation Lifts Japanese Bond Yields

Japan's 10-year government bond yield has steadied around 2.91% on Monday, ending a two-day decline. The stabilization comes as expectations grow that the Bank of Japan (BOJ) could raise interest rates this month.

Takuji Aida, an economic adviser to Prime Minister Sanae Takaichi, believes the BOJ is likely to hike rates in September and deliver another increase by January next year. This shift in stance suggests a growing recognition within the Takaichi administration that additional BOJ tightening may be needed to curb excessive yen weakness.

The Japanese bond yields have also climbed this year due to concerns over government spending under Takaichi's expansionary fiscal policy. Meanwhile, speculation has fueled about an unusual meeting of the management team at Japan's Government Pension Investment Fund (GPIF), which could lead to a potential increase in its target allocation to domestic bonds.