TOKYO, Sept 21 (Reuters) - Japan's 10-year government bond yield rose to its highest in a decade on Thursday, tracking U.S. Treasury yields after the Federal Reserve held interest rates steady but stiffened its hawkish stance with a further hike projected by the year-end.
The 10-year JGB yield rose to 0.745%, its highest level since September 2013, and was last seen at 0.735%, up 1.5 basis points (bps) from the previous session.
"The yields tracked U.S. Treasury yields higher after the FOMC's (Federal Open Market Committee) signal for further tightening," said Keisuke Tsuruta, a fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.
The U.S. central bank held interest rates steady as expected at the end of its two-day policy meeting, but the rate-setting FOMC said "inflation remains elevated" and Fed Chair Jerome Powell said the Fed's job is to lower it.
"The FOMC's comments confirmed the firmness of the U.S. economy, which could prompt the Bank of Japan (BOJ) to shift its policy. Concern about a slowdown in overseas economies was one reason the BOJ was cautions about normalising its policy," said Tsuruta.
The BOJ is expected to keep its dovish stance, as it is likely to keep interest rates ultra-low after its two-day policy meeting on Friday, a stark contrast with the U.S. and European central banks.
Japanese bond yields rose across the curve, with the 20-year JGB yield rising 0.5 bp to 1.455%. The 30-year JGB yield rose 0.5 bp to 1.700%.
The 40-year JGB yield rose 0.5 bp to 1.855%.
The five-year yield rose 1 bp to 0.290%.
The two-year JGB yield rose 1 bp to 0.030%.
(Reporting by Junko Fujita; Editing by Subhranshu Sahu)
