Japan’s 10-year government bond yield rose above 1.9% on Thursday, reaching its highest level since 2007 amid growing speculation that the Bank of Japan will raise interest rates this month. Expectations strengthened after BOJ Governor Kazuo Ueda expressed confidence in Japan’s economic outlook and said the central bank would carefully weigh the pros and cons of a rate hike and act as appropriate. Finance Minister Satsuki Katayama also noted this week that there is no divergence between the government and the BOJ in their economic assessments, signaling continued alignment between fiscal and monetary policy. However, Prime Minister Sanae Takaichi’s expansive spending plans continue to weigh on Japan’s fiscal outlook. Meanwhile, a sales of Japan’s 30-year government bonds attracted the strongest demand since 2019 as higher yields lured market interest. the bid-to-cover ratio of the latest 30-year auction jumped to 4.04 from 3.125 at the previous sale in November.
