Bank of Japan Raises Rates to 30-Year High, Pushing Bond Yields Past 2%

The Bank of Japan (BOJ) raised its benchmark short-term interest rates by 25 basis points to 0.75%, the highest level since 1995, marking a significant step in its policy normalization process. The decision drove a sell-off in government bonds, with the yield on 10 year Japanese government bonds (JGB) rising above 2% for the first time since 1999. The yield reached 2.019%, while the 20 year JGB yield climbed to 2.975%. Despite the rate hike, the BOJ noted that real interest rates are expected to remain 'significantly negative' and accommodative financial conditions will continue to support economic activity.