Japan’s 10-year JGB Yield Hits New Decade High Ahead of BOJ Meeting

Reuters file photo
Bank of Japan in Tokyo, Japan September 20, 2023

TOKYO, Oct 31 (Reuters) – Japan’s 10-year government bond (JGB) yield hit a fresh decade high on Tuesday amid speculation that the Bank of Japan will decide to raise a yield cap at its policy meeting.

The 10-year JGB yield JP10YTN=JBTC jumped 6.5 basis points to 0.955%, its highest since May 2013 and was last seen at 0.950%.

The Bank of Japan will likely revise up its inflation forecasts and discuss further tweaks to its bond yield control at its policy meeting which will end later in the day.

A spike in U.S. Treasury yields has pushed up JGB yields to decade highs almost every session, with the 10-year JGB yield nearing the BOJ’s 1% cap set in July.

This time, however, the BOJ’s tweak may come before the yield crosses the ceiling.

The BOJ raised its cap for the 10-year bonds twice in the past and both times the policy was tweaked after the yield crossed the ceiling under accumulated pressure, said Ataru Okumura, senior strategist at SMBC Nikko Securities.

This time the BOJ may do so before the yield hits the cap, which means the pace of the rise in yields in the long term may be slower than before.

The BOJ raised the cap for the 10-year bond yield to 0.5% in December and again in July to 1%.

The 2-year bond yield JP2YTN=JBTC rose to 0.140%, its highest since July 2013.