Inflation concerns intensify as Japan’s 40-year government bond yields rise

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Golden Finance reported that on July 24, as investors still did not believe that the Bank of Japan would quickly tighten monetary policy to rein in inflation, the yield on Japan’s 40-year government bonds rose by 10 basis points intraday to 4.010%, and the 5-year government bond yield also climbed to the highest level since the bonds were first issued in 2000. These gains were in line with the trend in U.S. Treasury yields, as rising oil prices boosted expectations in the market that the Federal Reserve will raise interest rates. Ataru Okumura, Chief Rates Strategist at SMBC Nikko Securities, said: “What the market is focusing on is that the Bank of Japan’s response to the rise in oil prices has been slow, which has led investors to demand a higher premium to hold long-term bonds because they are concerned that Japan faces relatively higher inflation risks. As worries about fiscal expansion intensify before the government ultimately finalizes the consumption tax reduction package in early August, yields may continue to rise.” (Jin 10)
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