FX.co ★ Japan 10Y Yield Holds Gains on BOJ Hike Bets

Japan’s 10-year government bond yield hovered around 2.66% on Friday, extending its recent climb as investors continued to position for a possible interest rate hike by the Bank of Japan later this month. On Wednesday, BOJ Governor Kazuo Ueda stated that the central bank should carefully weigh the costs and benefits of higher rates if upside inflation risks begin to outweigh downside risks to economic growth. Policymakers are also grappling with intensifying inflationary pressures driven by rising energy prices linked to the Middle East conflict. Markets are now assigning roughly an 80% probability to a rate increase at the BOJ’s June 16 policy meeting. Reinforcing the hawkish outlook, data released on Friday showed that Japan’s real wages rose 1.9% in April, the fourth consecutive monthly increase and a development that is bolstering expectations for further policy tightening.