Japanese bond yields are heading for their fifth quarterly rise, and stocks are rising with the support of artificial intelligence

Japanese government bond yields headed, on Wednesday, to record the fifth strong quarterly rise in a row for the first time since data began to be available in 1992, amid global selling pressure and concerns about Japanese public finances, at a time when stocks jumped led by semiconductor companies and artificial intelligence.

The yield on benchmark 10-year government bonds is heading to rise by about 42 basis points during the three months ending in September, recording the fifth consecutive double-digit quarterly increase, in an indication of the major shift that the Japanese debt market is witnessing with the normalization of monetary policy and rising inflation.

In Wednesday's session, the 10-year bond yield fell slightly, by 0.5 basis points to 3.08 percent, but remained close to its highest levels in three decades. Medium-term yields moved more rapidly as investors' bets on the timing of the Bank of Japan's next move changed. The two-year bond yield fell two basis points to 1.94 percent, after the relatively strong result of the new two-year bond auction helped calm investors' fears.

Expectations of the Bank of Japan raising interest rates in October also declined after bets on a similar increase from the US Federal Reserve declined, following dovish statements from New York Federal Reserve Bank President John Williams.

Masayuki Koguchi, Executive Director of Fund Management at Mitsubishi UFJ Asset Management, said that the rise in expectations for a Japanese interest rate increase in October was linked to the previous increase in bets on raising US interest rates, as markets fear that the widening of the yield difference between the two countries will lead to further weakness of the yen.

Swap contract prices currently indicate a 23 percent probability that the Bank of Japan will raise the interest rate to 1.5 percent during October, down from 36 percent in the previous session, according to Tokyo Tanshi.

In the stock market, the artificial intelligence boom overshadowed the concerns of the bond market, as the Nikkei 225 index rose by 1.94 percent to close at 66,753.72 points, after its gains exceeded 2 percent during the session. The broader Topix index rose 1.67 percent to 4,108.65 points. Artificial intelligence-related stocks tracked the gains of American semiconductor companies, after the Philadelphia Semiconductor Index rose 1.3 percent during Tuesday’s trading. SoftBank Group shares jumped 6.55 percent, Tokyo Electron rose 2.69 percent and Advantest rose 1.03 percent, while Fiber Optic Cable Company Fujikura rose 5.94 percent. Taiyo Yuden, the producer of capacitors used to regulate power in artificial intelligence servers, also rose 2.27 percent after announcing a business alliance with TDK, whose stock rose 2.12 percent.

The gains extended to banking stocks, which usually benefit from rising interest rates, with “Mizuho Financial Group” jumping 4.52 percent, while “Sumitomo Mitsui Financial Group” and “Mitsubishi UFJ Financial Group” shares rose by more than 3 percent each.

The gains reflected a clear expansion in the market, as 72 percent of more than 1,500 shares listed on the main market of the Tokyo Stock Exchange rose, compared to a decline of 23 percent, an indication that investors’ appetite for stocks remains strong despite the historic transformation witnessed by the bond market.

Goldman Sachs Bank confirmed, in a note, that oil exports from Gulf countries, including exports transported by ships sailing without operating their GPS devices, recovered to reach 23.3 million barrels per day during the past week, which is in line with the average for the year 2025, with exports rising to double this September.

In the note issued on Tuesday, the bank indicated that this recovery was driven by increased exports through the Strait of Hormuz, including ship-to-ship transfers.

Goldman Sachs explained that estimated exports of crude oil accounted for nearly 90 percent of the recovery witnessed by Gulf exports in September, as they reached 19 million barrels per day, or 108 percent of their average for the year 2025, during the past week.

The bank estimates that exports transported by ships without GPS devices amounted to about 5.2 million barrels per day in September.

Exports of refined products and liquefied petroleum gas grew, but exports of diesel, gasoline and jet fuel remain at 50 percent of their 2025 average, the bank added.

The bank's estimates indicate that the global oil market was approximately balanced during September, while commercial oil inventories in OECD countries are in line with levels in late February 2026.

The bank said: “The remarkable alignment of both Middle East supplies and import demand in China supports our basic scenario, which expects Brent crude prices to fall to $85 (per barrel) by the end of the year, and to $80 in 2027.”

Brent crude oil is heading for monthly gains of about 14 percent during September, the largest since last July. Prices rose during Wednesday's session after US President Donald Trump denied his willingness to ease sanctions on Iran, while Qatar expressed its hope that its diplomatic efforts would result in a breakthrough.

The bank said: “We remain concerned about the possibility of renewed escalation, leading to further damage to the energy infrastructure, which could cause a significant rise in prices.”

The Riksbank expects to start tightening its monetary policy later in the year, if growth and inflation consolidate their current path, according to the minutes of its last meeting, during which it decided to keep the key interest rate unchanged.

The central bank, known as the Riksbank, has kept the interest rate at 1.75 percent since September 2025, but the wait-and-see policy is nearing its end in light of escalating inflation pressures and improving economic growth, according to Reuters.

“Today I see it as appropriate to raise the interest rate as soon as possible, starting in November,” Sweden’s central bank governor Erik Ten said, according to the minutes of the meeting issued on Wednesday.

Deputy Governor Anna Sim also expressed her support for raising interest rates in November if current expectations for the economy do not change, indicating that she was close to voting in favor of raising them during the September meeting.

“But after several years of prolonged economic stagnation and continued high unemployment, I preferred to give the economy an additional chance,” Sim said.

The inflation rate, after excluding the impact of temporary tax cuts and energy price fluctuations, is close to the central bank's target of 2 percent. At the same time, the price of oil exceeded $100 per barrel, while there are no signs that the conflict in the Middle East is close to ending.

A survey conducted by the National Institute of Economic Research (NIER) this week showed that the economy is beginning to regain momentum, although some difficulties persist. He also indicated the willingness of companies to raise the prices of their products.

With continued inflation pressures, exacerbated by the weakness of the local currency and expectations that the European Central Bank will raise interest rates again this year, a tighter monetary policy in the coming months seems likely, although some analysts believe that Riksbank may postpone any interest rate hike until December.

The National Institute for Economic Research said, in its economic forecasts issued on Wednesday, that it expects to raise interest rates once this year and twice additionally in 2027.

Riksbank is scheduled to issue its next monetary policy decision on November 4.