After Ueda's speech, expectations for a rate hike by the Bank of Japan have increased, with the 5-year Japanese government bond yield rising to its highest level since 2009

At the beginning of the new year, Bank of Japan Governor Kazuo Ueda once again released hawkish signals, leading to increased market expectations for interest rate hikes by the Bank of Japan, pushing the yield on Japan's 5-year government bonds to its highest level since 2009.

On Monday, Ueda attended the New Year meeting of the Japanese Bankers Association in Tokyo and stated:

“Our position is that if the economic and price conditions continue to improve, we will raise the policy interest rate and adjust the degree of monetary easing.”

Observers are also looking for clues to determine whether the Bank of Japan will raise interest rates this month or in March. Ueda expressed an open attitude towards the timing of the next rate hike, stating that it will depend on economic, inflation, and financial conditions.

Influenced by Ueda's remarks and the rise in U.S. long-term Treasury yields, Japanese government bond yields surged significantly. The yield on Japan's 5-year government bonds rose to 0.77%, marking the highest level since 2009. The yield on Japan's 10-year government bonds also climbed to its highest point since July 2011.

Last month, the Bank of Japan kept the benchmark interest rate unchanged at 0.25%. Ueda's dovish remarks at the subsequent press conference further fueled market speculation that there may not be a rate hike in January, contrary to the expectations of most market observers, causing the yen to briefly drop to its lowest level against the dollar since July of last year.

However, the summary of the December meeting minutes suggested that some board members believe it is necessary to raise borrowing costs as soon as possible. Ueda's comments on Monday also emphasized that the Bank of Japan may raise rates this month, but may also choose to wait depending on the situation. This uncertainty has kept the yen at a relatively weak level, with the dollar rising 0.24% against the yen to 157.66.

Additionally, the Bank of Japan will hold its next policy meeting on January 23-24. Prior to this, Ueda has no scheduled public speeches, while Bank of Japan Deputy Governor Ryozo Himino will deliver a speech and hold a press conference on January 14. Analysts expect the market to closely monitor this event for further clues regarding a potential rate hike in January, but some analysts also believe that any rapid rate hikes could increase costs before banks adjust their portfolios, thereby harming bank interests