ISTANBUL
Japan’s benchmark 10-year government bond yield rose to its highest level since 1999 on Friday as investors increased bets that the Bank of Japan could resume raising interest rates amid persistent inflation pressures driven by higher energy costs.
The yield climbed to around 2.38%, extending a selloff in sovereign debt as the Middle East conflict kept oil prices elevated and reinforced concerns about imported inflation in Japan, which relies heavily on overseas energy supplies.
The move follows the BOJ’s decision last week to keep its short-term policy rate unchanged at 0.75% while maintaining a tightening bias, signaling that conditions for further rate increases remain in place. Governor Kazuo Ueda has said the central bank could continue raising rates if underlying inflation stays on track toward its 2% target.
Expectations for another rate increase have strengthened ahead of the BOJ’s next policy meeting on April 27-28. Analysts and former BOJ officials say the central bank may need to act soon if rising oil costs and a weaker yen feed more broadly into prices.
The yen has remained under pressure as higher crude prices increase Japan’s import bill, while mixed signals from Washington and Tehran on diplomatic efforts to ease the conflict have kept global markets uncertain. Brent crude traded above $107 a barrel on Friday after a sharp jump in the previous session.
Separately, the BOJ said updated estimates show Japan’s natural rate of interest remained broadly unchanged, though several measures pointed to a moderate upward trend, underscoring the challenge of calibrating monetary policy as inflation risks rise.