Japan's 10-year treasury bond yield hit the psychological threshold of 1% for the first time since the Bank of Japan increased unprecedented stimulus measures in 2013.
The yield on Japan's benchmark 10-year treasury bond rose 2 basis points to the highest level since May 2013, then fell back to 0.99% at 3 p.m. Tokyo time. The yield on Japanese treasury bonds recently hit a ten-year high. Including 20-year and 30-year treasury bonds, the inflation rate has been higher than the central bank's target level of 2% over the past two years.
The 1% level is critical to the market. Previously, it was a reference point for the Bank of Japan's yield curve control policy. The Bank of Japan lifted yield curve control in March, and at the same time withdrew from the negative interest rate policy. The swap market anticipates a 66% chance that the Bank of Japan will raise interest rates again at the late July meeting, compared to 14% when the historic policy decision was made in March.
“If interest rates are expected to rise, then the entire Japanese treasury yield curve, especially the 10-year treasury bond yield, will rise further,” said Shoki Mori, chief strategist at Mizuho Securities, and believes that 10-year national strategists may reach 1.2% in the next few weeks.