Japan's Bond Yields Surge to Highest Level Since 1996

The Japanese 10-year government bond yield has risen to its highest level since September 1996, closing at 2.955% on Tuesday.

This marks a significant shift in market expectations ahead of the Bank of Japan's policy decision on September 18, with investors now pricing in an approximately 87% chance of a 25 basis point hike to 1.25%, up from around 23% before the July meeting.

The rise in long-term yields reflects a changed inflation backdrop, with headline inflation running at 1.9% in July and underlying price pressures remaining firm.