Japan's 10-year government bond yield recently exceeded 2%, nearing a 27-year high as the Bank of Japan proposes ongoing, measured rate increases. Insights from the BOJ's December meeting reveal extensive discussion among policymakers regarding further tightening measures, even after last month's rate increment reached a multi-decade peak. Some policymakers emphasized that, in real terms, the current policy stance remains far from neutral and advocated for gradual hikes to mitigate inflation risks. Conversely, there were concerns that persistently low rates have depreciated the yen and elevated long-term yields. Effective, timely rate adjustments could potentially stabilize inflation expectations and bond markets, supporting a cautious yet steady path toward normalizing monetary policy. Additionally, recent data indicated Tokyo's annual inflation rate eased to a 2% low in December, below forecasts, as food and energy cost pressures softened, signaling potential trends on a national scale. Meanwhile, the government's proposed record-breaking ¥122.3 trillion budget for fiscal year 2026 is under close scrutiny by the markets, anticipated to drive long-term yields higher.