FX.co ★ Japan 10-Year Yield Edges Higher

Japan’s 10-year government bond yield rose to about 2.74% on Wednesday, a one-week high, following gains in US Treasury yields amid continued conflict in the Middle East that has pushed oil prices higher. The jump in energy costs risks quickening inflation in Japan and is bolstering expectations for a faster pace of Bank of Japan interest rate increases. At the same time, the yen’s drop to a new 40-year low is adding pressure for the BOJ to normalize policy more quickly. Investors are also focused on the Finance Ministry’s auction of roughly JPY 300 billion in 40-year government bonds later in the day, looking for signals about demand at current yield levels. On the data front, Japan’s trade balance swung back into deficit in June as import growth outstripped exports.