Japan’s 10-year government bond yield hovered around 2.41% on Friday, trading sideways for a third consecutive session as Bank of Japan Governor Kazuo Ueda refrained from giving clear guidance on the interest rate outlook ahead of the central bank’s upcoming policy meeting. Ueda underscored the delicate policy trade-off between upside risks to inflation and downside risks to economic growth.
Before the previous two rate hikes, Ueda had sent more explicit signals to prepare financial markets, and investors had been looking for a similar indication this time, particularly before geopolitical tensions in the Middle East intensified. Even so, the BOJ is widely expected to raise its inflation projections at this month’s meeting, partly reflecting higher energy costs.
Separately, the IMF said the BOJ could look past any inflation driven by the Iran-related conflict, arguing that its effect on underlying price pressures is likely to be limited and should not knock the central bank off its gradual tightening path.
