Tadashi Matsukawa, Head of Corporate Bond Investment at PineBridge Investments Japan, stated in an interview that yen intervention is widely seen as part of a broader policy mix that also includes an earlier-than-expected rate hike by the Bank of Japan. This combination is placing upward pressure on medium- and long-term Japanese government bond yields.

Given the possibility that the Federal Reserve and the European Central Bank may raise rates in September, the likelihood of a September rate hike by the Bank of Japan has also emerged. The market's previous assumption that the Bank of Japan would raise rates every six months no longer holds.

An early rate hike is unfavorable for Japanese government bonds with maturities of 10 years or less. The current yield on two-year Japanese government bonds, at approximately 1.5%, has not yet fully priced in the expectation of a rate increase.