JGB yields rise to two-week peak as inflation hits 40-year high, Fed stays hawkish
TOKYO — Japan’s short-term government bond yields rose to two-week highs and super-long yields rebounded from one-month lows on Friday, as the country’s core consumer inflation hit a 40-year high and U.S. Federal Reserve officials reiterated their hawkish tone.
The five-year JGB yield rose 2 basis points to 0.090%, while the two-year yield rose 0.5 basis point to -0.040%, both hitting their highest levels since Nov. 4.
The 20-year JGB yield rose 1.5 basis points to 1.045%, after starting the day by touching 1.020%, its lowest since Oct. 11.
The 30-year JGB yield rose 1 basis point to 1.405%, from a low of 1.385%, which before Thursday had not been seen since Oct. 7.
The nationwide core consumer price index (CPI) was up 3.6% on a year earlier, confirming that inflation remained above the Bank of Japan’s 2% target for a seventh consecutive month.
The data suggests Japanese firms may be shaking off their deflationary mindset, as they apply price rises to a broadening range of products.
The BOJ has remained a steadfast outlier to the global trend toward monetary tightening, sticking to extraordinary stimulus to support the economy.
“If this continues, it could give more reason for people to talk about a possible change in monetary policy,” said Masayuki Kichikawa, chief macro strategist, Sumitomo Mitsui Asset Management.
“Compared with six months ago, there is some change in the mindset of companies and consumers.”
St. Louis Federal Reserve Bank President James Bullard said overnight more interest rate hikes are necessary, with those comments supported by data showing continued tightness in the U.S. labor market.
Benchmark 10-year JGB futures fell 0.13 point to 149.37.
The 10-year JGB yield was flat at 0.240%. The BOJ keeps it pegged 25 basis points either side of zero under its yield curve control policy. (Reporting by Kevin Buckland; Editing by Rashmi Aich)
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