Japanese bond yields have spiked as the BOJ raises its base rate to 1%, the first increase since 1995. The 10‑year government bond rose to 2.91%, its highest in 30 years, while newly issued 2‑year bonds hit 1.500%, a 31‑year high, and 5‑year yields climbed to 2.020%.

The move follows expectations of an early hike, driven by rising oil prices, a weak yen and growing inflationary pressure. Bloomberg noted the BOJ is "strengthening its vigilance against the risk of prices exceeding expectations" and holds a flexible stance on accelerating hikes.

Government policy has shifted after the Takaichi administration’s draft policy was revised to emphasize the BOJ’s independence. A Nikkei survey shows many watchers predict a hike in December, while chief economist Yuichi Kodama forecasts October.

Deutsche Bank suggests Japan should focus on managing yields rather than defending the yen, citing a $2.3‑trillion growth strategy. The yen fell to a 40‑year low of about 163 per dollar amid oil and AI demand, keeping the BOJ on high vigilance.