Japan Long Bonds Rebound as Yields Drop Ahead of BOJ Policy Decision

Japan’s long-term government bond yields fell sharply on January 21, 2026, as investors adjusted positions ahead of the Bank of Japan’s policy meeting scheduled for January 22. The 10-year JGB yield dropped to 0.98%, its lowest level since November 2025, reflecting renewed demand for safe-haven debt amid speculation of a dovish shift in monetary policy. Market participants are pricing in a 65% probability that the BOJ will maintain its current policy stance, with expectations of further rate cuts if inflation remains below target. The rebound in long bonds followed a 3.2% sell-off in December 2025, driven by concerns over fiscal sustainability and rising yields. Yields have now reversed course, with the benchmark 10-year note trading at 0.98%—down from 1.14% on January 18. The move has prompted increased activity in futures markets, with CME Group reporting a 40% rise in open interest for JGB contracts.