Japan’s 10-year government bond yield climbed to around 2.45% on Monday, approaching levels last seen nearly three decades ago, as investors positioned themselves ahead of the upcoming Bank of Japan policy meeting, where interest rates are widely expected to be left unchanged. However, the central bank is likely to raise its inflation outlook while trimming its growth forecast to reflect the economic fallout from the conflict in the Middle East.
BOJ Governor Kazuo Ueda faces the challenge of reaffirming the bank’s commitment to a gradual normalization of monetary policy in order to shore up the yen, which has come under pressure amid a surge in oil prices linked to the war involving Iran. Recent data showed that Japan’s core inflation accelerated for the first time in five months, rising to 1.8% in March from 1.6% in February, while headline inflation picked up to 1.5% from 1.3% over the same period.
