The yield on Japan's two-year government bonds has broken 1% to reach a new high, with the market betting that the probability of a rate hike by the Central Bank in December exceeds 70%.

[Block Rhythm] The Japanese government bond market has been quite lively recently, with the two-year yield directly breaking 1%, which is the first time since 2008. The five-year and ten-year yields have also surged, reaching 1.35% and 1.845% respectively. The market is pondering one thing - is the Bank of Japan really going to raise interest rates this time? The yen briefly appreciated 0.4% against the dollar, touching 155.49.

The central bank governor Ueda Kazuo has not made a definitive statement, only saying that they will keep an eye on it and take action when necessary. However, traders have clearly already placed their bets: the probability of an interest rate hike at the meeting on December 19 is set at 76%, and it is expected to soar to over 90% for the January meeting. Meanwhile, the Japanese Ministry of Finance is preparing to issue more short-term government bonds to support Prime Minister Kishida Fumio's economic stimulus plan, which is likely to put pressure on short-term bond prices. The whole situation reflects a delicate balance where monetary policy expectations are tightening while fiscal policy is ramping up stimulus.