Japan's 10-Year Bond Yield Exceeds 1.5% Annually for First Time in 16 Years

Japan's 10-year government bond yield has surpassed 1.5% annually for the first time in 16 years. Bond yields jumped on expectations that the Bank of Japan (BOJ) would continue its policy of raising interest rates.

On the 6th, in the Japanese bond market, the 10-year government bond yield jumped to 1.521%, up 0.078% points from the previous day during the trading session. This is the first time the 10-year yield has exceeded 1.5% annually since June 2009. The remarks by BOJ Deputy Governor Shinichi Uchida the previous day that "if the economy and prices move as expected, we will continue to raise the benchmark interest rate" had an impact. The Bank of Japan raised its benchmark interest rate from 0.25% to 0.5% annually in January this year, the highest level in 17 years. Nevertheless, the Bank of Japan is maintaining its stance on additional rate hikes.

This is because economic growth in the fourth quarter of last year was higher than expected, and prices have been steadily rising recently. Interest rates are on an upward trend as signals emerge of an exit from the long-term recession that has lasted more than 30 years. Institutional investors are also betting on rising bond yields. In fact, Japan's 10-year government bond yield was around 1.09% at the end of last year, but due to the Bank of Japan's rate hike this year, it jumped to 1.37% at the end of last month and has continued to rise steadily since then.

The yen is also showing strength. A month ago, the yen exchange rate against the dollar was in the 152 yen range, but today it fell to the 149 yen range. As Japanese bond yields, which were previously in an ultra-low interest rate state, rise and the yen value increases, there are observations that the possibility of reducing yen carry trades, where investors borrow yen to invest in other assets, has increased.

Reporter Lee So-hyun y2eonlee@hankyung.com