Photo/Illutration The yield on 10-year Japanese government bonds temporarily entered the 1.90-percent range on Dec. 4 in Tokyo. (Chihaya Inagaki)

Yields on Japan’s benchmark 10-year government bonds on Dec. 4 hit their highest level in 18 years on growing expectations that the Bank of Japan will raise interest rates this month.

At one point, the yields reached 1.91 percent, up 0.02 points from the previous day, in the Tokyo bond market, while bond prices fell.

Investors are looking for clues on what the Bank of Japan will do at its monetary policy meeting later this month.

BOJ Governor Kazuo Ueda said in a speech on Dec. 1 that he would “make an appropriate judgment on whether to raise interest rates” at the December meeting.

According to a market analysis by Totan Research Co., the probability of an interest rate hike was 80 percent as of the afternoon of Dec. 3.

Concerns over Japan’s fiscal conditions have also led to selling of government bonds.

Under Prime Minister Sanae Takaichi’s “responsible proactive fiscal policy,” the government is expected to increase the issuance of bonds to fund her administration’s huge package of economic measures.

In November, long-term interest rates have risen by more than 0.2 percentage points. If the government’s expansionary fiscal policy gathers steam, interest rates could rise further.

Long-term interest rates serve as a benchmark for fixed mortgage rates.

The three megabanks, including MUFG Bank, raised their fixed rates in December. Their 10-year fixed interest rates reached their highest levels on record.

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