Joyo Bank Ltd., managing ¥2.6 trillion ($17 billion) in assets, is pivoting to shorter-term Japanese government bonds as interest rates rise. The Ibaraki-based lender, part of Mebuki Financial Group, is selling low-yielding bonds purchased before the Bank of Japan ended negative rates in 2023 and replacing them with higher-yielding two- to seven-year notes.

This cautious strategy reflects broader market uncertainty. Yoshitsugu Toba, who heads Joyo's markets division, is avoiding longer-dated securities, expecting the 10-year JGB yield to climb to 2.5-3% from current levels around 2.1%. The bank previously held substantial 20-year bonds during the negative-rate era but exited those positions around 2023.

Toba anticipates the BOJ will raise rates to 1.5% through quarterly 25-basis-point hikes, with a "sub-scenario" peak of 2%. The bank maintains bond exposure for portfolio balance, believing rate moves could offset potential equity market shocks. With super-long bond yields hitting records after political uncertainty over fiscal policy, Joyo's selective approach highlights how regional banks are navigating Japan's shifting monetary landscape.