Japan’s 10-year government bond yield steadied around 2.41% on Wednesday after declining in the previous session, as uncertainty persisted over the Bank of Japan’s monetary policy outlook. Earlier this week, BOJ Governor Kazuo Ueda stressed the need to closely monitor the economic impact of the Iran conflict, warning that higher oil prices could dampen Japan’s growth outlook. Markets are now pricing in roughly a 40% chance of a BOJ rate hike later this month, down from nearly 60% a week earlier. Meanwhile, the US and Iran are reportedly preparing for a second round of peace talks before the current two-week ceasefire expires, even as escalating tensions in the Strait of Hormuz continue to heighten global energy risks. Japan’s economy remains vulnerable to the supply shock from the Iran conflict, given its heavy reliance on Middle East oil imports.
