Rising bond yields in Japan are signaling growing market anticipation of a Bank of Japan rate hike. The yen is strengthening, fueled by rising inflation above the 2% target, and the two-year Japanese government bond yield climbed to its highest point since 2008, reaching 1%. This reflects increasing expectations of a BOJ rate increase in December, with market data currently indicating a 76% chance of a hike at the upcoming meeting. Analysts point to comments from BOJ Governor Kazuo Ueda as a key driver behind these developments. Governor Ueda stated the bank would weigh both pros and cons of a rate increase, while also emphasizing that conditions would remain accommodative. This stance, along with recent hawkish remarks by other prominent figures within the industry, has led to increased investor speculation about a potential December rate hike. 2025’s year-to-date performance for the Japanese Yen has seen it fall -5% against the US Dollar, making it one of the weaker performers in the G10 currency group. Japan’s Finance Ministry has announced plans to issue more short-term debt, with an estimated ¥6.3 trillion in Treasury bills, potentially influencing bond market supply and demand. Experts are cautiously observing these developments as they relate to medium-term bonds, noting that recent weakness in a two-year bond auction suggests caution amidst rising rates.