Japanese 10-year government bond yields have surged to their highest levels in nearly 16 years, driven by rising inflation expectations and a shift in global monetary policy. The yield on the benchmark 10-year bond climbed to 1.25%, a level not seen since 2009.

The surge in yields reflects growing concerns over inflation and the Bank of Japan’s (BOJ) potential policy adjustments. Analysts suggest that the BOJ may soon reconsider its ultra-loose monetary policy, which has kept interest rates near zero for years.

“The bond market is signaling a shift in sentiment,” said one economist. “Investors are anticipating increased inflation and the potential for stricter monetary measures.”

The rise in yields has also impacted Japanese equities, with the Nikkei 225 index falling 1.5% in early trading. Investors are closely watching the BOJ’s next moves, as any policy shift could have significant implications for global markets.