FX.co ★ Japan 10Y Yield Slips on Soft Inflation Data

Japan’s 10-year government bond yield fell to around 2.27% on Tuesday, pulling back from a two-month high after weaker-than-expected inflation data tempered expectations of near-term interest rate hikes by the Bank of Japan. Core consumer prices rose 1.6% in February, the slowest pace since March 2022, reflecting government measures to ease living costs. However, escalating energy prices linked to the conflict with Iran could drive inflation higher in the coming months.

Last week, the BOJ left its policy rate unchanged but signaled a tightening bias, aiming to counter inflationary pressures stemming from surging oil prices. At the same time, investors continued to closely track developments in the Middle East after President Donald Trump postponed planned strikes on Iranian energy infrastructure by five days, citing “productive” discussions with Tehran. Iran, however, publicly denied that any talks with the United States were taking place.