Japan Two-Year Bond Yield Nears 2% Amid Inflation and Yen Weakness

Japan's two-year government bond yield has neared 2%, its highest level since 1995, as persistent inflation and yen weakness push short-term borrowing costs higher.

The Bank of Japan (BOJ) raised its key policy rate to 1.25% earlier this month, the highest level in 31 years, but the yen has remained under pressure, adding to concerns that imported inflation could persist.

Markets are pricing in further BOJ tightening, with a 36% probability of a 1.5% interest rate hike in October, according to Tokyo Tanshi.