Japan's 10-year government bond yield broke through 2.330% on January 20, setting a record since February 1999. In contrast, the U.S. bond market has instead fallen into a calm period—its longest low-volatility phase since 2020. It appears that subtle changes are occurring in the global financial markets.

This Friday, the Bank of Japan will hold a monetary policy meeting. The consensus in the market is that interest rates will remain unchanged. But behind this "unchanged" stance, there are underlying currents. Long-term government bonds are experiencing continuous selling, with yields rising sharply, reflecting deep concerns about future policy directions.

What exactly is happening? Analysts point out that the pressure from yen depreciation combined with positive wage growth expectations has made policymakers highly wary of inflation risks. Policy makers are closely monitoring these signals, but when they will actually raise interest rates remains a mystery.

**A Turning Point Has Arrived**

The Bank of Japan has reached a historic crossroads.

According to Nikkei News, the market generally expects the central bank to maintain the 0.75% interest rate set in December 2025. How special is this figure? It is the highest level in Japan in nearly 30 years. More complicated is that this decision is made against the backdrop of rising bond yields and the upcoming early general election in February.

BOJ Governor Ueda Haruhiko has already hinted—there is a possibility of further rate hikes. Nomura Securities' FX strategist Yusuke Miyairi's analysis is even more direct: the BOJ is convinced that wage growth and potential inflation can remain robust, and is therefore prepared to adjust rates accordingly.

Every step of the BOJ's policy adjustments aims to curb inflation rebound. The latest corporate survey shows that Japanese companies generally expect wages to continue rising next year. This signal is both a pressure and a motivation for the BOJ.