FX.co ★ Japan 10-Year Yield Falls to 1-Month Low

Japan’s 10-year government bond yield fell to around 2.57% on Monday, a one-month low, after the US and Iran reached a peace agreement that would restore passage through the Strait of Hormuz. The news pushed oil prices to a two-month low, easing inflation worries and reducing cost pressures for major energy-importing economies such as Japan.

Investors are also positioning ahead of the Bank of Japan’s upcoming policy decision, where officials are widely expected to raise interest rates to rein in inflation and bolster the yen. Still, the currency remained under pressure as traders expanded short positions amid persistent carry trade activity, in which investors borrow in yen to invest in higher-yielding assets overseas. The moves underscore the still-wide interest rate gap with the US, which continues to overshadow the BOJ’s gradual tightening path and Tokyo’s repeated currency intervention efforts.