Japan's Bond Yields Soar to 30-Year High Amid Rate Hike Expectations

The Bank of Japan's decision to raise interest rates has sent shockwaves through the financial markets. The yield on newly issued 10-year Japanese government bonds rose as high as 2.930% at one point, its highest level in about 30 years since September 1996. This surge is largely attributed to expectations that the Bank of Japan will move to raise rates as early as its September monetary policy meeting.

The two-year yield also rose to a record high of 1.690%, and the five-year yield reached 2.170%. Former ADB President Takehiko Nakao noted that Japan's real interest rate remains negative, but it would not be unusual for the policy rate to reach 2.25% or 2.5%.

However, with second-quarter GDP growth falling short of market expectations at an annualized 1.1%, there are concerns about the pace of tightening.