Japan 10-Year Yield Climbs for Second Session

Japan’s 10-year government bond yield climbed above 2.8% on Monday, advancing for a second consecutive session as higher oil prices added to inflation concerns amid continued uncertainty over efforts to reopen the Strait of Hormuz. Iran said talks with Oman were approaching an agreement but denied holding direct negotiations with the US, despite Washington’s claims that a deal was close. Domestic data showed Japan’s current account surplus narrowed in June, with strong exports of AI-related electronics outweighed by higher imports driven by increased crude oil purchases. Meanwhile, the Bank of Japan warned of growing risks of accelerating inflation in its summary of opinions from the July meeting, with one board member suggesting that the pace of interest rate hikes could accelerate.

Japan’s 10-year government bond yield rose to around 2.78% on Friday, snapping a two-session decline as rebounding oil prices, driven by renewed tensions in the Strait of Hormuz, reignited concerns about inflation and the interest rate outlook. Meanwhile, data showed Japan’s household spending fell 3.3% in June, defying expectations for a 1% increase and underscoring continued weakness in consumer demand. On the monetary policy front, investors are looking toward a possible Bank of Japan interest rate hike in September after the central bank left policy settings unchanged last week. Minutes from the July policy meeting showed that several board members expect consumer inflation to accelerate significantly in the second half of the current fiscal year as companies continue implementing broad-based price increases across a wide range of goods.

Japan’s 10-year government bond yield eased to around 2.78% on Thursday, falling for a second consecutive session as lower oil prices following the partial reopening of the Strait of Hormuz reduced concerns over inflation and the outlook for interest rates. Iran and Oman reached an agreement to establish a shipping corridor through the strait, fueling expectations of stronger energy flows from the Middle East. Even so, Japanese bond yields continued to find support from growing expectations that the Bank of Japan will raise interest rates again. Minutes from the July policy meeting revealed that several board members expect consumer inflation to accelerate notably in the second half of the current fiscal year as companies press ahead with broad-based price increases across a wide range of goods. Meanwhile, the latest sale of 30-year Japanese bonds drew firm demand, with the bid-to-cover ratio at Thursday’s auction posting at 3.86 compared with 4.55 at the previous sale.