26.03.202603:00:41UTC+00Japan 10Y Yield Rises on Rate Hike Bets

Japan’s 10-year government bond yield climbed to around 2.27% on Thursday, snapping a two-day decline, as markets increasingly priced in the possibility of a near-term interest rate hike by the Bank of Japan. Shorter-dated 2-year yields jumped to their highest levels in three decades, while 5-year yields reached record highs.

The shift in expectations was largely driven by an oil-induced inflation shock stemming from the ongoing conflict in the Middle East, as major central banks signaled their readiness to tighten monetary policy in response to persistent price pressures. Although the BOJ left its policy rate unchanged last week, it maintained a tightening bias, with Governor Kazuo Ueda keeping open the option of a rate increase as early as April.

Oil prices continued to advance amid conflicting statements from the United States and Iran regarding diplomatic efforts to de-escalate the Middle East crisis. Adding to concerns over regional stability, a former Japanese national security adviser suggested that Japan consider deploying warships to help secure a critical maritime chokepoint in cooperation with other nations, in order to protect both Japanese vessels and those of its international partners.