BlackRock: Accelerated Rate Hikes by the Bank of Japan Could Drive Up Global Bond Yields

According to Zhitong Finance, BlackRock stated that if the Bank of Japan accelerates its pace of rate hikes, it could prompt Japanese investors to repatriate funds domestically in pursuit of higher returns, thereby driving up global bond yields. BlackRock's research department strategists, including Wei Li, wrote in a report that "the spillover effects are tangible," and there is a risk of feedback loops forming in the bond market. "Japan currently offers a considerable risk-free yield," the report noted. For decades, Japanese investors have sought income by channeling funds overseas due to persistently ultra-low domestic yields. However, with rising interest rates, some of these funds may flow back into the Japanese market. At the same time, given persistent inflation, Japan's economic situation necessitates tighter monetary policy. However, the growing government expenditure and debt exceeding twice the GDP make the cost of raising interest rates higher. "Overly loose monetary policy has put pressure on the yen," the report added.