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Bank of Japan Governor said the central bank stands ready to raise interest rates when needed to stabilize inflation. The remarks signal the BOJ is keeping the option of further tightening open, depending on price and economic data.
Japan's Ministry of Finance raised the coupon rate on newly issued 10-year government bonds to 3.1%, the highest in roughly 30 years. The ministry said the move reflects the recent rise in long-term interest rates.
The Nikkei briefly crossed 70,000 on Monday, its first time at that level since early July, led by large-cap technology stocks. The gains came as fading expectations of a Federal Reserve rate hike improved market sentiment, with investors watching U.S. monetary policy signals closely.
A sharp selloff in global bonds has pushed government borrowing costs in major economies to multi-decade highs. Rising inflation fears and concerns over public debt are driving yields up from the US to Germany and Japan, with potential ripple effects on stocks and corporate financing.
Bank of Japan Governor Kazuo Ueda said on August 25 that core inflation is moving closer to the 2% target, and the policy board will discuss a possible rate hike at its next meeting. His remarks come amid market scrutiny of the BOJ's tightening path after years of ultra-low rates. Analysts see potential for a near-term rate increase if data supports it.
A hawkish Bank of Japan member has called for a flexible, "nimble" approach to interest rate hikes, as the central bank navigates monetary tightening amid a fragile economic recovery. The remarks, reported by Kyodo News, highlight the need to avoid rigid policy plans in the face of economic and inflation uncertainties.
Japan's top government spokesperson said on August 25 that the country is 'closely monitoring' developments in the bond market amid global interest rate concerns. The statement reflects Tokyo's caution over recent movements in Japanese government bond yields and signals a readiness for potential policy responses.
Federal Reserve Chair Kevin Warsh warned that inflation is not yet on a clear path to the 2% target and signaled a possible interest rate hike if price pressures persist. Markets now see a 57.4% chance of a September rate increase, and analysts view his remarks as more hawkish than before.
BOJ Deputy Governor Ryozo Himino said the central bank should keep raising its key interest rate, citing rising inflation risks. His comments precede the next policy meeting in September, as markets seek clearer guidance on the pace of normalization.
