The Bank of Japan’s signal that it could soon raise interest rates again has added fuel to a brutal sell-off in the country’s bonds this year and sent a tremor through global financial markets.
Governor Kazuo Ueda on Monday used language taken by many economists as a clear indication he is preparing markets for a move before the year is out. Swaps markets are now pricing in a two-thirds chance of a rate rise this month.
After years of negative interest rates, which only ended last year and which allowed investors to borrow cheaply to buy higher-yielding foreign assets, global markets are now bracing themselves for the fallout from higher Japanese borrowing costs.
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