Japan 10Y Bond Yield Hits Near 27-year High

Japan’s 10-year government bond yield held around 2.78% on Friday, remaining close to its highest level in roughly 30 years even as softer domestic inflation eased pressure on the Bank of Japan to raise interest rates in the near term. Japan’s core inflation rate slowed to 1.4% in April from 1.8% in March, marking the lowest reading in four years and remaining below the central bank’s 2% target for a third consecutive month. The latest figures also followed reports that Prime Minister Sanae Takaichi signaled openness to a supplementary budget aimed at addressing rising energy costs. Meanwhile, investors continued to assess mixed signals surrounding US-Iran peace negotiations, which kept markets cautious over inflation risks and the outlook for future interest rate hikes.

Japan’s 10-year government bond yield slipped to around 2.77% on Thursday, retreating from 30-year highs as falling oil prices eased pressure on Japan’s import-dependent economy amid growing optimism over a potential peace agreement between the US and Iran. President Donald Trump said the US was in the final stages of negotiations with Iran, fueling expectations that the strategically important Strait of Hormuz could soon reopen. On the domestic front, data showed Japanese exports rose 14.8% in April, surpassing forecasts on the back of strong demand from China, the US, ASEAN nations and the European Union. Earlier data this week also indicated that Japan’s economy expanded more than expected in the first quarter, reinforcing expectations of a near-term interest rate hike from the Bank of Japan. Meanwhile, Japanese government bonds remained under pressure after Prime Minister Sanae Takaichi urged the finance ministry to prepare a supplementary budget to address rising commodity prices.

Japan’s 10-year government bond yield held around 2.79% on Wednesday, hovering at its highest level since September 1996 as strong economic growth data and mounting concerns over an energy-driven inflation shock reinforced expectations for a near-term interest rate hike from the Bank of Japan. Recent figures showed Japan’s economy expanded 0.5% in Q1, beating market expectations of 0.4% and marking the fastest pace of growth since Q3 2024. Adding to hawkish sentiment, the prolonged Middle East conflict has effectively kept the strategic Strait of Hormuz closed to shipping traffic, driving oil prices higher and intensifying global inflationary pressures. Markets are speculating that the BOJ could raise rates as soon as next month following hawkish signals from policymakers. Japanese bonds have also come under pressure after Prime Minister Sanae Takaichi called on the finance ministry to compile a supplementary budget in response to rising commodity prices, raising debt concerns.