Japan's Bond Auction Faces Rate Hike Fears Amid BOJ Uncertainty

• Investors await Japan's two-year government bond auction amid speculation of more aggressive Bank of Japan rate hikes to curb inflation and support the yen.
• The auction follows the BOJ's recent policy rate hike to a three-decade high, with Governor Kazuo Ueda offering little guidance on future rate paths, causing yen weakening and yield increases.
• Two-year bond rates hit their highest since 1996, and the 10-year breakeven inflation rate reached its highest since 2004, reflecting rising inflation expectations.
• Experts like Katsutoshi Inadome and Miki Den express unease, citing BOJ being "behind the curve" and risks of unrealized losses due to potential increased issuance.
• Market participants will closely monitor the bid-to-cover ratio and the "tail" for insights into market sentiment regarding the BOJ's policy stance and future bond supply.

Why It Matters: Japan's bond auction is a critical test of market sentiment amid BOJ rate hike uncertainty and inflation concerns.