Japan 10-Year Yield at 30-Year High

Japan’s 10-year government bond yield climbed toward 3.1% on Monday, remaining at its highest level since 1996 as persistent concerns over energy-driven inflation raised expectations that the Bank of Japan could accelerate its rate-hiking cycle. Oil prices rose after President Donald Trump rejected Iran’s latest proposal to reopen the Strait of Hormuz, while Tehran said it would not ease its conditions for reopening the critical waterway. Meanwhile, a former BOJ official said the central bank could raise its benchmark rate for a second consecutive month when policymakers meet in October, citing heightened inflation risks. Minutes from the BOJ’s July meeting also showed members emphasizing the need for preemptive action against upside risks to prevent sharper rate increases later, noting that the policy rate remains below the neutral range.

Japan’s 10-year government bond yield climbed toward 3.1% on Friday, reaching its highest levels since 1996 and following the rise in US Treasury yields as expectations grew that the Federal Reserve will tighten policy further to contain inflation. Bond markets continued to grapple with elevated oil prices that are fueling inflationary pressures further, though reports that the US and Iran are considering a phased deal provided some relief. The latest US Treasury bond buyback operation also came in below expectations, with just $4.078 billion of 20- and 30-year bonds purchased against $10.4678 billion offered. Domestically, former Bank of Japan board member Makoto Sakurai said the central bank is expected to raise interest rates roughly once every three months, potentially lifting them to 2% by around June next year as it seeks to address mounting inflationary pressures.

Japan’s 10-year government bond yield climbed to around 3.08% on Thursday, reaching its highest level since August 1996 and tracking a surge in US Treasury yields as strong US private-sector activity data reinforced expectations for further Federal Reserve rate hikes. A weak auction of five-year Treasury notes also intensified the global bond selloff. Meanwhile, uncertainty surrounding US-Iran negotiations kept oil prices elevated, adding to inflationary pressures. In Japan, S&P Global data showed manufacturing growth slowed to a seven-month low in September, amid softer increases in output and new orders. Last week, the Bank of Japan raised interest rates in a widely anticipated move, with two officials dissenting. Governor Kazuo Ueda said the central bank remains committed to raising rates and adjusting the degree of monetary accommodation in response to changing economic conditions.