Japan’s 10-year government bond yield climbed toward 1.85%, reaching its highest level since June 2008, as expectations of a policy rate hike from the Bank of Japan continue to mount. The swap market now prices in roughly a 62% chance of a rate increase at the BOJ’s upcoming policy meeting on December 19, with expectations rising to nearly 90% by the January meeting. These increasing bets on a December rate hike have intensified as Japan’s inflation has persistently exceeded the BOJ’s 2% target, prompting criticism that the central bank is lagging in its monetary tightening. On the economic front, Tokyo’s manufacturing PMI was slightly revised downward to 48.7 in November 2025, from the preliminary estimate of 48.8, following a final reading of 48.2 in the previous month. This marked the fifth straight month of contraction in the factory activity, albeit the softest pace since August.
