FX.co ★ Japan 10Y Yield Jumps on Inflation Concerns

Japan’s 10-year government bond yield climbed above 2.3% on Monday, approaching the multi-decade highs reached earlier this year as the ongoing conflict in the Middle East and surging oil prices intensified global inflation concerns. Tensions remain elevated: President Donald Trump has issued a 48-hour ultimatum to Iran to reopen the Strait of Hormuz or face strikes on its power plants, while Tehran has warned it will target key US and Israeli assets in the region if its energy infrastructure is attacked.

Against this backdrop, the Bank of Japan last week left its policy rate unchanged but signaled a bias toward tighter monetary policy to counter inflationary pressures stemming from higher oil prices. Board member Hajime Takata dissented for a second consecutive meeting, calling for a 25-basis-point increase to 1%. BOJ Governor Kazuo Ueda also indicated that a rate hike remains on the table if the economic slowdown linked to the Iran conflict proves temporary.