Market News

(Bloomberg) -- Japan's 40-year government bond yield rose 10 basis points, as investors remain unconvinced that the nation's central bank will tighten policy fast enough to quell inflation.

The 40-year rate climbed to 4.01%, while the five-year yield rose to its highest since its debut in 2000. The increases track moves in US Treasuries as higher oil prices boosted bets that the Federal Reserve will raise interest rates.

Bank of Japan officials are open to raising interest rates at a faster pace than the consensus among economists, as the yen's continued weakness adds to upside inflation risks, according to people familiar with the matter. Half of economists surveyed by Bloomberg still expect the central bank to wait until December to lift rates, with Prime Minister Sanae Takaichi's government seen as a key obstacle to further action.

Read: Japan's Inflation Picks Up, Keeping BOJ on Path for Rate Hikes

"The market is focusing on the BOJ's slow response to rising oil prices, prompting investors to demand a higher premium to hold longer bonds amid concerns that Japan faces relatively elevated inflation risks," said Ataru Okumura, chief rates strategist at SMBC Nikko Securities. "Yields will likely continue to rise as concerns over fiscal expansion intensify ahead of the government's finalization of its sales tax cut proposal in early August."

--With assistance from Masahiro Hidaka.