Japan 10Y Yield Hits Fresh 29-Year High

Japan’s 10-year government bond yield fell to around 2.66% on Tuesday, hovering near two-week lows as investors continued to evaluate the outlook for Bank of Japan monetary policy while keeping a close watch on developments in the Middle East. Markets are currently pricing in roughly a 78% probability that the BOJ will raise interest rates again later this month amid a renewed surge in inflation linked to the Iran conflict. The yen’s weakness has reinforced expectations for tighter policy, as rising energy costs have weighed on the currency and increased concerns about the impact on household spending. Investors are now awaiting remarks from BOJ Governor Kazuo Ueda later this week for additional clues on the central bank’s policy direction. Meanwhile, Tehran reportedly suspended talks with Washington in response to Israeli strikes in Lebanon, although President Donald Trump said negotiations remain ongoing.

Japan’s 10-year government bond yield rose to around 2.69% on Monday, recovering from two-week lows as higher oil prices weighed on bond markets amid continued uncertainty over a lasting ceasefire between the US and Iran. Over the weekend, Washington and Tehran exchanged proposals seeking amendments to a draft agreement that would extend the ceasefire and reopen the Strait of Hormuz, though it remained unclear whether the negotiations were making meaningful headway. Markets continue to debate whether the Bank of Japan will raise interest rates this month, with policymakers facing increased uncertainty stemming from tensions in the Middle East. Investors are now awaiting remarks from BOJ Governor Kazuo Ueda later this week for further guidance on the central bank’s policy outlook. Meanwhile, Japan’s capital spending was unchanged in the first quarter from a year earlier, pointing to a loss of momentum in corporate investment activity.

Japan’s 10-year government bond yield declined to around 2.65% on Friday, reaching a two-week low amid increased uncertainty over the near-term outlook for monetary policy from the Bank of Japan. Reports that the US and Iran have reached a tentative agreement also eased concerns about inflation and interest rates, pulling global bond yields lower. Earlier in the week, BOJ Governor Kazuo Ueda highlighted rising inflation risks linked to higher oil prices but refrained from signaling whether a rate hike could be considered at the upcoming policy meeting. He emphasized the need to closely assess how energy-driven price pressures may affect Japan’s underlying inflation trend, without offering clear guidance on the timing of any policy shift. Meanwhile, recent data showed Japan’s retail sales growing at the fastest pace in a year, while industrial production unexpectedly rose, underscoring a mixed but generally resilient domestic economic backdrop.