26.05.202607:27:07UTC+00Japan 10Y Yield Rises on Hawkish BOJ Signals

Japan’s 10-year government bond yield climbed to around 2.72% on Tuesday after Bank of Japan Deputy Governor Ryozo Himino reaffirmed the central bank’s commitment to further interest rate increases. He emphasized, however, that the timing and pace of any hikes would depend on how the conflict in the Middle East affects Japan’s economic activity and inflation outlook.

Supporting expectations of additional tightening, recent data showed that Japan’s core inflation—measured using a new gauge introduced by the central bank—accelerated in April and moved well above the BOJ’s 2% target. This has strengthened market speculation that policymakers could raise rates as early as next month.

At the same time, Prime Minister Sanae Takaichi’s administration announced plans to draft an additional budget to subsidize fuel costs and alleviate cost-of-living pressures. The prospect of greater fiscal spending added to upward pressure on Japanese government bond yields.

On global markets, oil prices advanced after the US military conducted new strikes in southern Iran, even as President Donald Trump stated that negotiations with Tehran were continuing to make progress.