Bank of Japan’s Ueda rattles global bond markets with the prospect of a rate hike this month

Core Viewpoint - Bank of Japan Governor Kazuo Ueda's recent speech suggests a potential interest rate hike, impacting global bond markets and signaling a shift from decades of ultraloose monetary policy [1][4]. Group 1: Interest Rate Changes - The Bank of Japan (BOJ) is considering raising its policy interest rate at the upcoming meeting on December 19, following a previous increase to 0.5% in January [2]. - Ueda's comments have led to a significant rise in Japanese bond yields, with the 2-year yield surpassing 1% and the 10-year yield reaching nearly 1.88%, marking the highest levels in 17 years [4]. Group 2: Global Market Impact - The remarks triggered a global bond-market selloff, affecting debt trading in countries such as Australia, New Zealand, France, Italy, Greece, and the U.S. [3]. - U.S. Treasury yields also spiked, with the 10-year and 30-year yields increasing by more than 7 basis points, reaching almost 4.1% and 4.74%, respectively [6]. Group 3: Economic Context - Japan's economy is experiencing a moderate recovery, prompting discussions about the end of an era of ultraloose monetary policy that lasted for decades [3][7]. - The potential rise in Japanese yields and a stronger yen could lead to capital outflows from U.S. markets, tightening global financial conditions [4][5].