Japanese government bond yields edged higher on Monday as investors assessed the monetary-policy outlook ahead of central bank meetings. The benchmark 10-year JGB yield rose 1.5 basis points to 2.810%. Markets expect the Bank of Japan and the US Federal Reserve to keep rates unchanged while monitoring signals for December.

Synopsis

Japanese government bond yields edged higher as investors assessed the monetary-policy outlook ahead of meetings by the Bank of Japan and the US Federal Reserve. Markets expected both central banks to keep rates unchanged while monitoring signals about possible December rate increases, inflation and economic growth.

Japanese government bond (JGB) yields edged higher on Monday as investors assessed the outlook for monetary policy ahead of key central bank meetings, following a sharp rally in bond prices last week, Reuters reported.

The benchmark 10-year JGB yield rose 1.5 basis points to 2.810%, recovering slightly after recording its steepest weekly decline since April 2025. Bond yields move inversely to prices.

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Japanese government bonds rallied last week as investors sought safe-haven assets amid growing concerns about the sustainability of the artificial intelligence-driven stock market rally, Reuters reported.

The outlook for Japanese bonds will depend partly on the Bank of Japan's ability to continue raising interest rates to contain inflation while balancing risks to economic growth, particularly if AI-related investment slows, according to market analysts.

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The BOJ raised its policy rate to 1.25% in September and is widely expected to leave rates unchanged at its October 29-30 meeting, while maintaining a hawkish policy stance. Markets are increasingly pricing in the possibility of another rate hike as early as December.

Meanwhile, the Federal Reserve is widely expected to keep interest rates unchanged at its October 27-28 meeting, with economists surveyed by Reuters anticipating a potential rate hike in December.

Other Japanese government bond yields also advanced on Monday. The two-year JGB yield, which is particularly sensitive to expectations for BOJ policy rates, climbed 2.5 basis points to 1.885%. The five-year yield rose 3 basis points to 2.250%.

Investors will closely monitor signals from the BOJ and the Fed this week for clues on the future path of interest rates, inflation and global economic growth. The outcome of these meetings could influence demand for Japanese government bonds as markets reassess monetary policy expectations and broader financial market risks, Reuters reported.

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