Japan's Two-Year Bond Yield Nears 2% as BOJ Rate Hikes Loom

Japan's two-year government bond yield has reached historic levels as investors expect the Bank of Japan (BOJ) to raise interest rates again. The yield rose 1.5 basis points to 1.95% on Monday, matching its peak level from the previous week.

This move follows the release of the BOJ's July meeting minutes, which showed policymakers discussing the need to respond more quickly to rising inflation risks. Several policymakers argued that the bank needed to pay greater attention to upside inflation risks and that the pace of future rate increases could be faster than markets had previously anticipated.

The BOJ raised its policy rate to 1.25% on September 18, its highest level in 31 years. The central bank's current guidance calls for the uncollateralized overnight call rate to remain around 1.25%. The BOJ's next monetary policy meeting is scheduled for October 29-30.