Just realized something interesting looking back at early 2025 – the entire market was basically screaming that the BOJ had to move on rates. If you were paying attention to the bond market back then, the signals were impossible to miss.

So here's what went down. The Bank of Japan had been sitting on negative rates forever, right? But come early 2025, traders started seriously pricing in a rate hike – we're talking 70% probability for their April meeting according to Citi's analysis. That's a massive shift from the "rates will stay negative indefinitely" narrative that dominated just months before.

The real tell was what happened in the government bond market. Those 10-year JGB yields? They climbed to 2.4%, the highest level since 1999. That's not some minor move – that's breaking through barriers that had held for literally 25+ years. When bond yields spike like that, it's because the market is repricing everything. Investors were basically saying "okay, the free money era is ending."

Why did this happen? Inflation in Japan actually stuck around. For years the BOJ kept saying price increases were temporary, but then you had wage negotiations showing the biggest salary bumps in three decades. Once wages start rising sustainably, inflation gets embedded differently – it becomes structural rather than transitory.

The global context mattered too. The Fed was already tightening, ECB was tightening, and Japan was the outlier still running ultra-loose policy while domestic inflation sat above 2%. The contradiction became impossible to ignore.

What made this so significant beyond Japan? The yen is basically the funding currency for global carry trades. If the BOJ finally raised rates, you'd see yen appreciation and unwinding of all those cheap-yen funded positions worldwide. Plus Japanese investors hold massive amounts of foreign bonds – if domestic yields became attractive, they'd repatriate capital from US and European debt markets. That's real capital flow consequences.

The bond yield situation was the clearest signal that the market had fundamentally reassessed Japan's inflation trajectory and the BOJ's policy path. You couldn't run a yield curve control framework capping 10-year yields around 1% when market forces were pushing bond yields to 2.4%. The market was just too strong.

Looking at it now, that repricing of bond yields was basically the market voting with its feet – saying the era of extreme monetary accommodation was genuinely ending. The BOJ had to eventually acknowledge what the bond market was already pricing in.