FX.co ★ Japan 10Y Yield Drops on Mideast Ceasefire

Japan’s 10-year government bond yield fell to around 2.35% on Wednesday, pulling back from its highest level in 28 years after the United States, Iran, and Israel agreed to a two-week ceasefire to facilitate negotiations on a potential end to the war. US President Donald Trump postponed planned strikes on Iranian civilian infrastructure for two weeks, describing the move as a “double-sided ceasefire,” while Iran agreed to reopen the Strait of Hormuz and Israel committed to suspending hostilities during the truce.

Earlier in the week, Japanese government bond yields had climbed to their highest levels in nearly three decades as markets weighed the possibility that the Bank of Japan could raise interest rates this month, amid intensifying inflationary pressures driven by elevated energy prices. Further upward pressure came from the yen’s weakness, which amplifies imported inflation. However, the temporary ceasefire in the Middle East and the reopening of the Strait of Hormuz helped support a recovery in the Japanese currency.