FX.co ★ Japan 10Y Yield Extends Rally on Hot PPI

Japan’s 10-year government bond yield rose to around 2.7% on Friday, its highest level in nearly a decade, after stronger-than-expected producer inflation strengthened expectations that the Bank of Japan may continue raising interest rates. Producer prices climbed 4.9% year-on-year in April, a sharp acceleration from 2.9% in March and well above market forecasts of 3%, as cost pressures intensified following a surge in energy prices. BOJ board member Kazuyuki Masu also urged that policy rates be increased as soon as possible, warning of increasingly persistent inflation risks linked to the ongoing war. Oil prices remained elevated as diplomatic efforts to defuse the US–Iran conflict continued to stall, effectively keeping the critical Strait of Hormuz closed. At the same time, Japan’s latest 30-year government bond auction saw stronger demand than the 12-month average, supported by higher yields that drew in investors.