FX.co ★ Japan 10-Year Yield Rises on Oil Rally

Japan’s 10-year government bond yield rose to around 2.73% on Friday, climbing for a second straight session as oil prices surged this week amid the escalating conflict between the US and Iran, which has effectively unraveled the interim peace agreement. Given Japan’s heavy reliance on energy imports from the Middle East, the country remains particularly exposed to potential supply disruptions.

The benchmark yield is also hovering near a 30-year high, reflecting mounting concerns over Japan’s fiscal expansion plans and persistent inflationary pressures. The government recently released a draft roadmap calling for more than ¥370 trillion in combined public and private investment through fiscal 2040, spanning 17 strategic sectors prioritized by the Takaichi administration.

At the same time, a recent report indicated that Japan has no immediate plans to revise the asset allocation of its state pension funds, tempering expectations for near-term support for domestic financial markets.