Analysis-BOJ’s rate-hike path runs into Takaichi’s bond market problems

The Bank of Japan (BOJ) may be considering an early rate hike, but it confronts challenges from Prime Minister Sanae Takaichi's fiscal policies, which are driving up bond yields. Takaichi's administration has urged the BOJ to buy bonds to curb rising long-term rates, reflecting concerns over higher yields' impact on Japan's debt servicing costs.

The BOJ is grappling with political pressure to support the bond market, potentially affecting its plans to taper its bond-buying program. While some analysts suggest the BOJ's bond buying may already be influenced by these political pressures, the central bank remains committed to policy normalization, even as markets remain focused on future rate hikes.