FX.co ★ Japan 10Y Yield Sideways on BOJ Policy Uncertainty

Japan’s 10-year government bond yield hovered near 2.4% on Wednesday, trading largely sideways this week as investors reassessed the Bank of Japan’s policy outlook ahead of next week’s meeting. Market reports indicate the central bank is likely to leave interest rates unchanged this month while it evaluates the economic impact of the Middle East conflict, though it may signal a possible move toward policy normalization as early as June.

The BOJ is also expected to raise its inflation forecasts and lower its growth projections, reflecting higher energy costs and broader pressures stemming from the Iran war. Adding to the uncertainty, a planned second round of US-Iran peace talks collapsed, although President Donald Trump extended the current ceasefire.

On the data front, Japanese exports increased for a seventh consecutive month, supported by firm demand from China and ASEAN economies. However, the trade surplus of 667 billion yen fell short of market expectations for a 1.1 trillion yen surplus.