On December 1st, according to the Japan Times, the yield on Japanese two-year government bonds rose to 1%, a new high since 2008, indicating market expectations that the Bank of Japan (BOJ) will soon raise interest rates. The five-year and ten-year yields rose to 1.35% and 1.845% respectively, and the yen appreciated by 0.4% against the dollar to 155.49 at one point. BOJ Governor Kazuo Ueda stated that the bank will weigh the pros and cons of raising interest rates and make a decision at the appropriate time.
The market expects a 76% probability of a rate hike at the BOJ meeting on December 19, rising to over 90% at the January meeting. Meanwhile, the Japanese Ministry of Finance plans to issue more short-term government bonds to support Prime Minister Sanae Takaichi's economic stimulus package, which is expected to put downward pressure on short-term government bonds.
