Markets now price a 50% chance of a 25bp Bank of Japan hike in September amid rising long-end JGB yields and inflation concerns.
Long-end Japanese government bond yields are rising due to inflation risks and fiscal concerns, pushing markets to price a roughly 50% chance of a 25 basis point Bank of Japan rate hike in September. A full hike is expected by year-end as policymakers debate overshoot risks.
The BoJ’s July meeting summary revealed a shift in focus from lifting inflation to preventing an overshoot, with members warning that delaying action could lead to larger, more disruptive hikes later. While some argued for holding rates to assess prior hikes, the overall tone favored further tightening.
Analysts note that prolonged inaction could trigger a “double shock,” forcing the BoJ to move more aggressively if inflation pressures persist. The debate reflects growing unease over sustained price increases and their impact on bond markets.