Japan’s 2-Year Bond Yield Shatters 1% Barrier as BoJ Rate Hike Probability Soars to 80%

Markets brace for impact as Japan’s short-term debt hits a boiling point.

The Bank of Japan’s tightening gamble sends shockwaves through yields.

Traders scramble—because nothing says 'stable economy' like bond volatility.

2-year government bond yield climbed above 1% for the first time since 2008.
5-year yield ROSE to 1.345%, a level last seen in June 2008.
30-year yield briefly reached a record high of 3.395%.

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— BlockFlow (@BlockFlow_News) December 2, 2025

JGB Yields Reach Highest Levels in Nearly Two Decades

The benchmarkroseto, reaching its highest level since July 2006, according to Trading Economics data.

The, often considered the clearest reflection of BoJ policy expectations, climbed above, a level not seen since mid-2007.

The surge followed comments from BoJ Governor, who said the central bank WOULD “carefully weigh the merits and demerits” of a rate hike at its upcoming policy meeting. Analysts interpreted the remark as the clearest signal to date that the BoJ may raise interest rates.

Over the past month:

• The 10-year yield has risen 0.22 percentage points
• Compared with a year earlier, it is 0.80 percentage points higher

Although Japan remains far from the all-time high ofrecorded in June 1984, the recent surge marks a dramatic shift after nearly 20 years of ultra-low interest rates.

Economists see this as afor Japan’s monetary regime.

Markets Now See 80% Probability of a December Rate Hike

Market pricing shows traders now assign anto a rate hike at the, sharply higher than about 60% last week.

Governor Ueda has expressed confidence that the Japanese economy will rebound from weak Q3 growth, and says the impact of U.S. tariffs appears far less severe than initially feared.

Recent discussions betweenand Governor Ueda also suggest political backing for a shift away from monetary stimulus as Japan moves toward policy “normalization.”

Rising Yields Pose Risks for Global Liquidity and Crypto Markets

Japan’s rapidly rising bond yields could have, particularly through the unwinding of the long-standing—a strategy in which investors borrow low-yielding yen and invest in higher-yielding assets such as U.S. Treasuries or emerging-market bonds.

If Japanese rates rise:

• Borrowing in yen becomes more expensive
• Investors may unwind carry trade positions
• Global liquidity could tighten
• Volatility in risk assets may surge

Analysts warn that crypto assets, especially, could face sudden downside pressure if yen-funded positions begin to reverse.
Previous carry-trade unwinds have triggered sharp selloffs across global markets.

Interactive Brokers noted that theis a psychological milestone signaling that markets believe Japan’s era of ultra-easy monetary policy is nearing its end.

With the next BoJ meeting scheduled for, investors worldwide are bracing for potential shifts that could Ripple across traditional and digital asset markets alike.

A confirmed rate hike , Japan’s first in years, could trigger, making caution essential for investors.

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