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

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

The BOJ raised its key policy rate to 1.25% earlier this month, but the yen remains under pressure, adding to concerns that imported inflation could persist.

Markets are increasingly pricing in the possibility of consecutive BOJ rate increases, with a 36% probability of a hike to 1.5% in October and full pricing for December.