The two-year Japanese government bond yield has soared to its highest level since 2008, and the market is eagerly awaiting the central bank's interest rate decision.

Noticeably, the price of 2-year Japanese government bonds has fallen, pushing yields to their highest level since 2008, following the trend of US Treasury bonds ahead of the Bank of Japan's policy meeting. The 2-year yield, sensitive to monetary policy expectations, rose by 0.5 basis points to 0.885%. Market doubts arose about further interest rate cuts by the Federal Reserve later this year after the US weekly employment data, causing overnight US bond yields to climb as well. Kazuhiko Sano, Chief Strategist at Daiwa Securities in Tokyo, said: "Aside from the US trend, the sell-off may be coming from traders who have bet on a hawkish stance before the press conference of Governor Kuroda and President Amano - despite the general expectation that they will remain cautious." This shift comes ahead of the Bank of Japan's policy meeting on Friday. The market widely expects the central bank to keep rates unchanged, with the focus on any clues regarding actions in September or December. While short-term yields rose, long-term yields also increased due to concerns about inflation expectations - as the Japanese government faces pressure to increase spending and reduce taxes. The economic outlook is becoming more complex amid uncertainties about trade policies and the political risks brought by Prime Minister Shinzo Abe's announcement of his resignation plan. However, according to sources, Bank of Japan officials believe that despite the political instability, given that economic developments are in line with expectations, there is still a possibility of raising the benchmark interest rate again this year. A Bloomberg survey shows that most central bank watchers expect a rate hike before January, with a slightly lower proportion opting for a hike next month after Abe's resignation. Overnight index swaps indicate a probability of about 58% of the Bank of Japan raising rates before the end of the year. US Treasury Secretary Scott Besen recently criticized the policies of other central banks, saying that the Bank of Japan is lagging behind in tackling inflation. Bank of Japan Governor Haruhiko Kuroda also stated at the Federal Reserve's annual Jackson Hole symposium last month that a tight labor market is expected to continue to exert upward pressure on wages.