Japan’s 10-year government bond yield climbed to 2.38% on Thursday, marking an all-time high and ending a three-day decline, as market expectations for a Bank of Japan rate hike grew. Markets now assign a 71% probability of a BoJ interest rate hike, partly reflecting concerns about rising inflation from higher oil prices amid the ongoing Middle East conflict. US President Trump warned that new military action against Iran could occur within the next two to three weeks, even as he described the conflict as “very close” to completion and emphasized that diplomatic discussions continue.
Japan, a major importer of Middle Eastern oil, has felt the impact sharply, with gasoline prices soaring to record levels in mid-March before easing slightly due to government subsidies. Meanwhile, newly appointed BoJ board member Toichiro Asada signaled a cautious, data-driven approach in his first briefing, highlighting the BoJ’s careful balancing act between supporting growth and curbing inflation.
