Japan’s 10-year government bond yield eased to around 2.36% on Monday, remaining near its highest level since 1999, as an oil-driven inflation shock linked to the Middle East conflict reinforced expectations of an imminent rate hike by the Bank of Japan. Oil prices continued to climb amid persistent tensions in the region, with President Donald Trump stating he could “take the oil in Iran,” and Iran-backed Houthi militants in Yemen entering the conflict.
At the same time, the BOJ’s Summary of Opinions from its March meeting signaled a more hawkish stance among policymakers, including one member who argued that a larger rate increase might be warranted in light of the Middle East turmoil. The sharp depreciation of the yen, which broke through the key 160-per-dollar threshold, added further pressure on the central bank to tighten policy, as higher import costs increasingly weigh on households and businesses.
