BOJ October hike likelihood raises JGB buying opportunity, says Resona CIO

Resona Holdings

24/07/2025 03:48

By Anton Bridge, Tomo Uetake and Miho Uranaka

TOKYO, July 24 (Reuters) - There is a good chance the Bank of Japan will hike interest rates in October following the Japan-U.S. trade deal, providing a buying opportunity for Japanese government bonds, said Resona Holdings' 8308.T chief investment officer.

On Wednesday afternoon, the yield of 10-year government bonds rose to 1.6%, the highest since 2008, as market participants saw the trade deal as reducing risk to Japan's economy and providing scope for the central bank to raise interest rates to fight inflation.

Ten-year government bonds look set to trade at 1.7% to 2.2% over the next couple of years, said Hideki Tahara, CIO at Resona, Japan's fourth-largest financial group.

"There's a good chance we'll start buying in earnest when yields close in on 2.2%," Tahara said in an interview on Wednesday.

BOJ Deputy Governor Shinichi Uchida on Wednesday said the trade deal raised the probability of inflation sustainably meeting the central bank's 2% target.

To manage inflation, there is a good chance of the BOJ hiking its policy interest rate to 0.75% in October, Tahara said, and that depending on circumstances the central bank may hike again to 1% in the six to 12 months thereafter.

Bond yields typically increase with expectations of higher interest rates.

Drivers of inflation domestically and globally may yet accelerate again, Tahara said, identifying U.S. tax cuts and expansionary fiscal policy in Germany as potential contributors.

"We're working to the assumption that there will be no return to a world without inflation," Tahara said.

"If inflation picks up once again the only way to tame it is through monetary policy," Tahara said.

 (Reporting by Anton Bridge, Tomo Uetake and Miho Uranaka; Editing by Christopher Cushing)

 ((Anton.Bridge@thomsonreuters.com;))