Japan 10-Year Yield Retreats as Oil Prices Fall

Japan’s 10-year government bond yield declined to around 2.71% on Monday, pulling back from 30-year highs as oil prices dropped amid signs that the US and Iran were moving closer to a deal that could reopen the Strait of Hormuz. A full reopening of the key waterway would ease pressure on major Asian economies heavily dependent on Middle Eastern oil imports, while lower crude prices also help reduce inflation and interest rate hike concerns. Data released last week also showed that Japan’s core inflation rate slowed to a four-year low in April, easing pressure on the Bank of Japan to tighten monetary policy in the near term. Still, the central bank could continue raising interest rates as the Japanese economy remains relatively resilient, supported in part by strong export performance. Separately, reports suggested that Prime Minister Sanae Takaichi signaled openness to introducing a supplementary budget to help offset rising energy costs.