16.03.202604:03:53UTC+00Japan 10Y Yield Edges Higher Ahead of BOJ

Japan’s 10-year government bond yield climbed above 2.25% on Monday, hitting a five-week high ahead of an anticipated decision by the Bank of Japan to keep interest rates unchanged, amid elevated uncertainty over how the war involving Iran will affect the domestic economy.

Last week, BOJ Governor Kazuo Ueda cautioned that a weaker yen could exacerbate imported inflation as rising oil prices feed through to costs, potentially prompting the central bank to quicken the pace of policy normalization. He noted that exchange rate movements now appear to have a stronger impact on inflation than in the past, giving them greater significance in policymakers’ deliberations.

The conflict involving Iran and the resulting surge in oil prices continued to weigh on Japan’s oil-import-dependent economy, undermining growth prospects and heightening inflation risks. Meanwhile, Japanese Defense Minister Shinjiro Koizumi said Japan currently has no plans to dispatch warships to the Strait of Hormuz, despite pressure from the United States on other countries to do so.