FX.co ★ Japan 10-Year Yield Tracks US Treasury Yields Higher

Japan’s 10-year government bond yield climbed to around 2.77% on Wednesday, a one-week high, tracking the rise in US Treasury yields. The move followed hawkish remarks from Federal Reserve officials and stronger-than-expected US inflation data, which bolstered expectations of further Fed rate hikes.

Futures markets are now pricing in about a 91% probability of a Fed rate increase next month, up from 84% just a day earlier, with additional hikes in January and potentially April also under consideration.

At the same time, the Bank of Japan’s latest Summary of Opinions indicated broad consensus among policymakers that interest rates should continue to rise, as underlying inflation has reached levels broadly consistent with the BOJ’s 2% price stability target. BOJ Chief Economist Seisaku Kameda also signaled on Monday that the central bank is likely to raise rates in December and maintain its monetary tightening stance throughout next year.