Japan's 40-year government bond yield rose 10 basis points to 4.01% as investors doubt the Bank of Japan will tighten policy fast enough to curb inflation. The five-year yield climbed to its highest since its debut in 2000, tracking moves in US Treasuries amid higher oil prices that boosted Federal Reserve rate-hike bets. BOJ officials are open to raising rates faster than the consensus among economists, with half of those surveyed by Bloomberg still expecting a December hike. Ataru Okumura, chief rates strategist at SMBC Nikko Securities, said the market is focusing on the BOJ's slow response to rising oil prices, prompting investors to demand a higher premium to hold longer bonds amid elevated inflation risks, and that yields will likely keep rising as fiscal expansion concerns intensify ahead of the government's sales tax cut proposal finalization in early August.
Bank of JapanArticle criticizes BOJ's slow response to inflation and rising yields, implying policy credibility challenge.
Sumitomo Mitsui Financial Group, Inc.Higher yields benefit banks' net interest margins; SMFG is a major Japanese bank with large bond holdings.