FX.co ★ Japan 10Y Yield Gains on Hawkish BOJ Bets

Japan’s 10-year government bond yield climbed to around 2.89% on Tuesday, trading near multi-decade highs as expectations strengthened for an imminent interest rate hike by the Bank of Japan. Former BOJ board member Seiji Adachi said the central bank will likely raise rates next month and again as early as January, cautioning that keeping policy unchanged could trigger renewed yen selling and intensify import-driven inflation. Markets are now pricing in roughly an 80% chance that the BOJ will lift rates by 25 basis points to 1.25% next month, up sharply from about 23% before the central bank’s July meeting. At the same time, the Finance Ministry is considering increasing the assumed interest rate used to project debt-servicing costs to 3.8% for fiscal 2027, from 3% in the current budget, underscoring the mounting impact of higher government borrowing costs.