(Bloomberg) -- Investors need to prepare for Japan’s benchmark 10-year bond yield rising to around 2% if the central bank’s inflation goal is realized and it ends its negative-rate policy, according to a former research chief at the Bank of Japan.

While financial markets have moved toward factoring in the lifting of the short-term negative rate in the January-March quarter, they may be caught out by a spike in longer-term rates, said Toshitaka Sekine, a professor at Hitotsubashi University’s Graduate School of International and Public Policy and former head of the BOJ’s Research and Statistics Department.

“They have to keep these levels in mind somewhere or they will be in trouble,” Sekine said in an interview on Thursday.

Sekine said he’s been surprised by a data set from the internal affairs ministry showing the consumer price index, excluding food and energy prices, rising at 2.7% in August from a year ago. The same goes for labor ministry figures showing July’s 2.4% gain in the fixed salaries of ordinary workers. “I have rarely seen such numbers,” he said. 

The BOJ’s outlook report released in April showed the year-on-year gain in another measure of prices, excluding fresh food and energy, likely at 1.8% in the fiscal year starting April 2025. “I was horrified at the close proximity to 2%,” he said. “I felt that if this were the case, the BOJ would have changed its policy.”

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