Japan’s 10-year government bond yield hovered around 2.27% on Tuesday, following a robust 20-year JGB auction that underscored solid investor demand despite growing inflation concerns driven by rising oil prices. As an economy heavily reliant on energy imports, Japan has come under pressure from surging oil costs, which have raised the risk of stagflation.
Bank of Japan Governor Kazuo Ueda noted that underlying inflation is gradually approaching the central bank’s 2% target. Nevertheless, the BOJ is widely expected to leave interest rates unchanged at its meeting this week, amid elevated uncertainty over how the ongoing war involving Iran will affect the domestic economy.
Japan has so far declined US President Donald Trump’s request to deploy warships to escort oil tankers through the Strait of Hormuz. Still, some market participants are beginning to speculate that the BOJ could opt for a rate hike as early as April.
