Bank of Japan Governor Kazuo Ueda signaled a rate hike is on the table this month, sending Japanese yields to levels not seen in decades and reframing the global bond selloff as more than a US story.
Bank of Japan Governor Kazuo Ueda said the central bank would debate raising interest rates "including in September," in remarks delivered ahead of the bank's pre-meeting blackout period. Markets are now pricing a high probability of a hike at the September 17-18 meeting. Japan's two-year government bond yield reached 1.83%, its highest level since 1995, and the ten-year yield briefly touched 3% for the first time since 1996.
That matters beyond Japan. The US ten-year Treasury yield has separately climbed to its highest level since November 2023, and a second major central bank turning hawkish suggests this is a broader global repricing rather than a US-specific phenomenon. The move is already reaching American households: the average 30-year fixed mortgage rate rose to 6.74% and the 15-year rate to 6.16%, both up more than 15 basis points.
A hawkish Bank of Japan also raises the risk of a yen carry-trade unwind. When Japan's policy rate rises relative to other major economies, the incentive to borrow cheaply in yen and invest in higher-yielding assets elsewhere shrinks, a dynamic that has historically coincided with bouts of global market volatility once it reverses quickly.