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Japan's 10-year government bond yield experienced a 2 basis point increase, reaching approximately 1.96% on Monday. This marks the second consecutive session of gains as investors gear up for the Bank of Japan's upcoming policy meeting. The central bank is broadly anticipated to raise the policy rate by 25 basis points, bringing it to 0.75%. Market participants will be eager to analyze the post-meeting remarks from Governor Kazuo Ueda, seeking insights into the policy direction for the coming year. Analysts predict that the policy rate could potentially reach 1% by July. The expectation of a tighter monetary policy has been underpinned by strong economic indicators, notably consumer inflation that remains above historical norms. Additionally, reports suggest that high-ranking officials in Prime Minister Sanae Takaichi’s cabinet are unlikely to oppose the rate hike, pointing to concerns over the weak yen driving up import costs and inflation. Moreover, central bank data revealed that the sentiment among large manufacturers rose to +15 in the fourth quarter, up from +14 in the third quarter—marking the highest level in four years.
