Japan’s 10-year government bond yield slipped to around 2.4% on Monday, extending the previous week’s decline as investors continued to reassess the Bank of Japan’s policy outlook. Markets remain split on the likelihood of an interest rate hike later this month, with Governor Kazuo Ueda refraining from giving any clear indication about an April move.
Even so, the BOJ is widely expected to upgrade its inflation projections at this month’s meeting, reflecting persistently high energy costs. Separately, the IMF indicated that the BOJ could largely look through inflation stemming from the conflict involving Iran, arguing that its impact on underlying price dynamics is likely to be limited and should not derail the central bank’s gradual tightening path.
At the same time, US–Iran tensions intensified over the weekend. The United States seized an Iranian-flagged cargo vessel in the Gulf of Oman, while Tehran backed away from plans to reopen the Strait of Hormuz and announced it would not participate in a second round of negotiations.
