TOKYO: Japanese government bond yields rose on Monday as data for a fast-paced wage increase drove bets for another interest rate hike by the Bank of Japan.

The 10-year JGB yield rose 2 basis points (bps) to 1.085%.

The five-year yield rose 2 bps to 0.595%.

Japanese workers saw their average base pay climb 2.5% in May, the fastest pace in 31 years, government data showed, as bumper pay hikes offered by companies in annual wage negotiations took effect.

“The outcome of the “shunto” wage negotiations has reflected in wages, which drove expectations that the BOJ may raise interest rates soon,” said Katsutoshi Inadome, a senior strategist at Sumitomo Mitsui Trust Asset Management. Wages hold the key to how soon the central bank could raise interest rates.

In mid-March, workers from the nation’s largest trade unions scored a 5.25% wage hike agreement after the annual wage talks known as “shunto”.

The BOJ then made its landmark decision to end negative interest rates and yield curve control policy.

The BOJ said on Monday that wage hikes are spreading to smaller companies in regional areas as they scramble to retain or hire workers.

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“But until the market learns details on the outcome of the BOJ’s policy decision to be made later this month, the 10-year JGB yield will not exceed a recent peak of 1.1%,” said Inadome.

The BOJ next meets for a policy meeting on July 30-31, when it will disclose details on its bond buying plans as well as produce fresh quarterly growth and price forecasts that serve as a basis for deciding future monetary policy.

The 20-year JGB yield rose 1 bp to 1.940%.

The 30-year JGB yield was flat at 2.200%.

The two-year JGB yield was also flat at 0.34%.