Japan 10Y Yield Hits 28-Year High

Japan’s 10-year government bond yield rose above 2.4% on Monday, reaching levels not seen since July 1997, amid rising expectations that the Bank of Japan will tighten policy in response to mounting inflation pressures driven by higher energy prices. Markets now assign more than a 70% probability of a BOJ rate hike this month, with expectations for over two additional increases by year-end. The IMF on Friday also urged the BOJ to continue gradually raising its policy rate toward a neutral level to curb underlying inflation. Additional pressure comes from the yen’s weakness, which fuels imported inflation. Oil prices climbed further after President Donald Trump escalated threats against Iran, though Tehran dismissed the latest ultimatum. Japan remains highly exposed to oil supply disruptions due to its dependence on Middle East imports, prompting releases from emergency reserves and efforts to secure alternative energy sources.

Japan 10 Year Government Bond Yield increased to 2.40%, the highest since July 1997. Over the past 4 weeks, Japan 10Y Bond Yield gained 23.17 basis points, and in the last 12 months, it increased 128.25 basis points.

Japan’s 10-year government bond yield traded around 2.39% on Friday, remaining at an all-time high as markets weighed growing expectations for a Bank of Japan rate hike. Markets now assign a 71% probability of a BoJ interest rate hike, partly reflecting concerns about rising inflation from higher oil prices amid the ongoing Middle East conflict. US President Trump warned that new military action against Iran could occur within the next two to three weeks, even as he described the conflict as “very close” to completion and emphasized that diplomatic discussions continue. Japan, a major importer of Middle Eastern oil, has felt the impact sharply, with gasoline prices soaring to record levels in mid-March before easing slightly due to government subsidies. Meanwhile, newly appointed BoJ board member Toichiro Asada signaled a cautious, data-driven approach in his first briefing, highlighting the BoJ’s careful balancing act between supporting growth and curbing inflation.