Weekly Commentary: Global Monitoring Report On NBFI

2025-12-20 01:55:20 ET

Seems ominous. The Bank of Japan's Friday 25 bps rate hike was widely expected. Yet 10-year JGB yields still jumped five bps to 2.02%, the high all the way back to February 17, 1999. It's worth noting that Japan's government debt-to-GDP ratio surged from 130% in 1999 to 221% (3/31/25). Curiously, the yen sank 1.4% on Friday's "tightening", the low versus the dollar back to January 14th.

December 19 - Financial Times (Leo Lewis): "Japan's benchmark government bond yields hit their highest level since 1999 after the central bank pushed up short-term interest rates to address rising prices and wages. The Bank of Japan raised its policy rate by 0.25 percentage points to 'around 0.75%', a three-decade high, and signalled its readiness to continue monetary tightening if conditions are right. The rate increase, a unanimous decision by the bank's Policy Board, was the fourth under Governor Kazuo Ueda, continuing a 'normalisation' process he launched last year. The rate is the highest since 1995 as Japan emerges from decades when it maintained an ultra-loose monetary policy to try to fight deflation. Despite the prospect of further rate increases, the yen weakened against the dollar following the BoJ's move."

The yen closed the week less than 3% from July 2024's multi-decade low (161.69) vs. the dollar (7/2/86) - during a period of yen devaluation following the September 1985 Plaza Accord....

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