Japanese 10-year government bond yields have climbed to 2.90-2.93%, their highest level since September 1996, after rising more than 70 basis points since early 2026. The Bank of Japan raised its policy rate to 1.0% in June, the highest in thirty years, with markets pricing in another hike as soon as September. Producer price inflation reached 7.2% in July, near its highest since March 2023, driven by rising energy costs and Middle East tensions. Analysts are watching the 3.0-3.5% range on the 10-year yield as a potential threshold for BOJ intervention through bond purchases. This monetary normalization could trigger repatriation of Japanese capital invested abroad, with potential spillover effects on global bond markets and yen appreciation.
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