Japan's 10-year government bond yield fell to around 2.65% on Friday, a one-week low, as investors looked ahead to next week’s Bank of Japan policy meeting, where the central bank is widely expected to raise interest rates in response to persistent inflation and a weak yen. The BOJ is forecast to lift its policy rate by 25 basis points to 1%, which would be the first hike since December of last year and the highest level since 1995.
At the same time, BOJ Governor Kazuo Ueda has been hospitalized with a hepatic cyst infection and will miss the upcoming meeting. Japanese government bond yields also tracked a decline in US Treasury yields after President Donald Trump said a peace agreement with Iran could be signed as early as this weekend in Europe. His remarks pushed oil prices sharply lower, easing market concerns over stubborn inflation and reducing expectations for further interest rate increases.