Japan’s 10-year government bond yield surged above 0.6%, hitting its highest levels in nine years after the Bank of Japan loosened its grip on interest rates, allowing the 10-year Japanese government bond yield to rise above the 0.5% upper limit. The BOJ kept its short-term interest rate target at -0.1% and that for the 10-year government bond yield around 0% during its July meeting. The central bank also maintained guidance allowing the 10-year yield to move 0.5% in either direction, but stated that those would be “references” rather than “rigid limits.” That would be the first surprise move from the BOJ since Governor Kazuo Ueda took over, which will likely spur bets of further policy normalization. Markets have been speculating for months that the last major central bank to retain a dovish position could finally cave as persistent inflation and rising global interest rates put constant pressure on Japan’s bond yields and currency.
Historically, the Japan Government Bond 10Y reached an all time high of 7.59 in June of 1984. Japan Government Bond 10Y - data, forecasts, historical chart - was last updated on August of 2023.
The Japan Government Bond 10Y is expected to trade at 0.71 percent by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, we estimate it to trade at 0.91 in 12 months time.