Japan Yields Soar with US Treasury Bond Market

Japan's bond market is mirroring the rise in US Treasury yields as investors anticipate further interest rate hikes from the Federal Reserve. The yield on Japan's 10-year government bond hit 3.1% on Friday, its highest level since 1996. This move follows the increase in US Treasury yields, which has been driven by expectations of tighter monetary policy to combat inflation.

The bond market is also grappling with the impact of elevated oil prices, which are fueling further inflationary pressures. However, reports that the US and Iran are considering a phased deal on their nuclear program have provided some relief. The latest US Treasury bond buyback operation came in below expectations, with $4.078 billion of 20- and 30-year bonds purchased against $10.4678 billion offered.

Former Bank of Japan board member Makoto Sakurai expects the central bank to raise interest rates roughly once every three months, potentially lifting them to 2% by around June next year. This would be a response to mounting inflationary pressures in the country.