FX.co ★ Japan 10Y Yield Holds Steady on BOJ Uncertainty

Japan’s 10-year government bond yield held near 2.41% on Wednesday, stabilizing after a decline in the previous session, as uncertainty over the Bank of Japan’s monetary policy path persisted. Earlier this week, BOJ Governor Kazuo Ueda emphasized the need to closely watch the economic fallout from the Iran conflict, warning that elevated oil prices could weigh on Japan’s growth outlook. Markets are now assigning roughly a 40% probability to a BOJ rate hike later this month, down from nearly 60% a week earlier.

At the same time, the US and Iran are reportedly preparing for a second round of peace talks before the current two-week ceasefire expires, even as rising tensions in the Strait of Hormuz continue to amplify global energy risks. Japan’s economy remains particularly exposed to supply shocks stemming from the Iran conflict, owing to its heavy dependence on oil imports from the Middle East.