30.04.202602:47:54UTC+00Japan 10-Year Yield Hits 29-Year High

Japan’s 10-year government bond yield climbed above 2.5% on Thursday, its highest level since 1997, as surging oil prices tied to the Middle East conflict stoked inflation fears and strengthened expectations that major central banks may need to raise interest rates. The move followed President Trump’s statement that the United States would maintain its naval blockade on Iran until a nuclear agreement is reached, dimming hopes for a swift resolution to the conflict.

Last week, the Bank of Japan left its policy rate unchanged at 0.75%, as it continues to weigh persistent inflation risks against growth headwinds stemming from the Middle East situation. However, three of the nine policy board members voted in favor of a rate hike, and Governor Kazuo Ueda reaffirmed the central bank’s commitment to a gradual tightening of monetary policy.

Further depreciation of the yen could also heighten pressure on the Bank of Japan to raise rates, especially if imported inflation accelerates via exchange-rate pass-through effects.