Japan 10Y Yield Hovers at 28-Year High

Japan’s 10-year government bond yield held around 2.43% on Tuesday, hovering at its highest level in nearly three decades on expectations that the Bank of Japan will raise interest rates this month amid mounting inflation pressures fueled by higher energy costs. Markets now assign over a 70% probability of a BOJ rate hike at its April meeting, with further increases anticipated later in the year. On Friday, the IMF also urged the BOJ to continue gradually raising its policy rate toward a neutral level to contain underlying inflation. Additional pressure stems from the yen’s weakness, which drives imported inflation, while oil prices climbed further as President Donald Trump’s deadline for Iran to reopen the Strait of Hormuz or face intensified attacks on civilian infrastructure approaches.

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.