Japan’s 10-year government bond yield jumped to 2.93% on Monday, reaching its highest level since 1996 amid growing expectations for an imminent Bank of Japan interest rate hike despite weaker-than-expected GDP data. Preliminary figures showed Japan’s economy expanded at an annualized 1.1% in Q2, below market expectations of 2%, as weak domestic demand offset strong exports. Earlier this month, the BOJ released its economic activity outlook and marginally raised its GDP growth forecast to 0.6% from 0.5% for the 2026 fiscal year ending in March 2027. Meanwhile, traders are speculating that the BOJ could raise rates as soon as September after a growing number of policymakers called for a stronger response to mounting inflationary pressures. The central bank is also contending with persistent yen weakness, which could add to inflationary pressures.