FX.co ★ Japan 10Y Yield Hits 28-Year High

Japan’s 10-year government bond yield climbed to around 2.4% on Monday, its highest level since July 1997, as markets increasingly anticipate that the Bank of Japan will tighten monetary policy in response to mounting inflationary pressures driven by higher energy costs. Investors now see more than a 70% chance of a BOJ rate hike this month and are pricing in more than two additional increases by the end of the year. On Friday, the IMF also urged the BOJ to continue gradually raising its policy rate toward a neutral level to contain underlying inflation. Further pressure stems from the yen’s weakness, which amplifies imported inflation. Oil prices rose again after President Donald Trump intensified his threats against Iran, although Tehran dismissed the latest ultimatum. Japan, heavily reliant on oil imports from the Middle East, remains highly vulnerable to supply disruptions, prompting drawdowns from emergency reserves and efforts to diversify and secure alternative energy sources.