JGB Yields Soar on Inflation Worries, BOJ Hints at Further Rate Hikes

Japanese government bond yields surged on Thursday, September 24, as concerns about inflation resurfaced despite the Bank of Japan's recent rate hike. The 10-year JGB yield jumped to a 31-year high of 3.075%, its highest since August 1996, while the five-year yield reached a record high of 2.375%.

The increase in yields reflects a global market rout and domestic inflation worries, as well as signals from BOJ Governor Kazuo Ueda that further rate hikes may be on the horizon. 'Interest rates are being reviewed globally, and Japan's interest rates are particularly low,' said Masayuki Koguchi, executive chief fund manager at Mitsubishi UFJ Asset Management.

The selloff in bonds was also influenced by the yen's weakness against the dollar, which increases import costs and pushes domestic prices higher. Local media reports about Economic Minister Minoru Kiuchi seeking advice from reflationist economists added to concerns that the central bank may be behind the curve in addressing rising prices.