Japan’s Bond Yield Hits 17-Year High as BOJ Rate Hike Speculation Grows

Japan's 2-year government bond yield surged to 1%, marking its highest level in 17 years, as markets brace for potential monetary policy tightening. The yen strengthened 0.3% to 155.71 against the dollar ahead of a pivotal speech by Bank of Japan Governor Kazuo Ueda in Nagoya.

"The two-year JGB yield reflects growing expectations for BOJ action," said Sumitomo Mitsui Banking Corp's chief FX strategist Hirofumi Suzuki. "Ueda's tone today could accelerate these trends—any hawkish signals WOULD likely push yields higher and further strengthen the yen."

Corporate investment showed contradictory signals, with capital expenditure excluding software dipping 0.3% quarter-on-quarter despite preliminary GDP showing 1% overall growth. The shift follows five quarters of corporate profit growth now cooling under pressure from elevated US tariffs.

Interest rate swaps now price a 62% probability of a December hike, up sharply from 30% weeks ago, with near-certainty priced for January. Analysts warn such a MOVE could trigger volatility across global fixed income markets, with potential spillover effects into risk assets including cryptocurrencies.