Japan’s real policy rate remains deeply negative; yen and bond sell-off reflects overheating concerns, BCA warns of further weakening within the year

智通财经2026/07/28 19:41

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BCA Research points out that the ongoing sell-off of the yen and Japanese government bonds essentially reflects the contradiction between the central bank's accommodative policy and the nascent inflationary pressures. The real policy interest rate, adjusted for inflation, is around -0.75%, with lower negative levels only seen during the post-pandemic inflation surge.
The extremely loose monetary policy environment is gradually overheating the economy, which has become the key reason why investors have lost confidence in the yen and bond assets. BCA expects both to face further downward pressure throughout 2026.
On Tuesday, the US dollar rose slightly against the yen to around 163.85, having touched a 40-year high of 163.98 last week. The yield on Japan's 10-year government bonds was largely unchanged at 2.775%, as the market remains highly watchful for any potential adjustment to the central bank's yield curve control policy.

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Japan’s real policy rate remains deeply negative; yen and bond sell-off reflects overheating concerns, BCA warns of further weakening within the year

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