Recent US inflation surprises and hawkish Federal Reserve signals have driven a global Treasury selloff, lifting the Japan 10-year JGB yield to approximately 2.86% as of November 13, 2026, while reinforcing expectations for a Bank of Japan rate hike in December. This has narrowed the spread between market-implied odds for the 2.6-2.8% and 2.8-3.0% buckets at year-end, as traders weigh the BOJ’s gradual normalization path—targeting a terminal rate near 2%—against subdued domestic consumption and yen volatility. Producer price gains and upward revisions to core inflation forecasts add upside pressure, yet recent auction results and overnight-index swap pricing around 87% for a near-term hike underscore the competitive dynamics between global yield correlations and Japan-specific monetary policy calibration.
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