Analysis: The yield curve of Japanese government bonds has reached its steepest level since the turn of the century.

The spread between the 5-year and 30-year Japanese government bond yields is climbing to unprecedented levels not seen since the turn of the century. This steepening trend is gaining new momentum as Japanese government bond traders expect the Bank of Japan to maintain interest rates unchanged by the end of the year amidst continued political turmoil in Japan. A key driver of this trend is that with the Bank of Japan adopting a wait-and-see approach, sticky inflation may persist for a longer period, especially against the backdrop of expected further wage increases. Currently, the 5s30s spread in Japan is over 200 basis points, which is an extremely steep level compared to other G-10 countries. Due to political factors hindering the Bank of Japan from taking action to suppress inflation, it is unlikely that this spread will flatten in the short term.