Bank of America Global Research discusses the impact of the repricing of Japanese rates on global rates markets.

"The repricing of Japanese rate markets has been considerable and the bear steepening of the JPY curve at times pronounced. Correlation of 10y and 30y swap rates between Japan, the US and the Euro Area (EA) have increased.

However, evidence of the repricing of Japan driving global rates markets is limited. Granger causality tests fail to suggest that Japan is driving global 10y and 30y yields. The beta between Japanese rate markets and US and EA is below historical averages," JPM note.

"The R-squared of our standard term premium estimate has declined in EUR and USD since the sell-off in JPY rates started. This "unexplained" variance could be indicative of JPY spill-over effects. However, term premium has declined or remained unchanged over the last year in EUR and USD, while increasing sharply in JPY.

What has been driving the sell-off across global rate markets is the normalisation of monetary policy cycles post-pandemic. Japan is not driving global rate markets higher, the BoJ and Japan rates are playing catch-up to other rate markets as Japan escapes the deflation and liquidity trap of the last few decades," JPM adds.