On March 9, Japanese government bond yields rose across the board as escalating tensions in the Middle East drove up oil prices, sparking market concerns about rising inflation.
According to Refinitiv data, the benchmark 10-year Japanese government bond yield rose 6.5 basis points to 2.225%, the 20-year yield increased by 8.5 basis points to 3.085%. The 30-year yield rose by 9 basis points to 3.475%, and the 40-year yield climbed to 3.68%.
Naoya Hasegawa, Chief Bond Strategist at Okasan Securities, stated that the inflationary pressure from rising oil prices had outweighed the safe-haven support for bonds.
He noted that the recent bond market trend had been mainly following stock market fluctuations, but as oil prices swiftly rose, inflation expectations became the main driver pushing yields higher.
On Monday, international oil prices rose by about 20%, reaching the highest level since July 2022. The market is concerned that escalating conflicts between the US, Israel, and Iran could affect Middle East oil supplies and disrupt the strategic Strait of Hormuz shipping lane.
In the foreign exchange market, the dollar rose about 0.5% against the yen to 158.68. The depreciation of the yen further increased import costs and exacerbated domestic price pressures in Japan.
Mizuho Securities Chief Bond Strategist Noriyoshi Tanji stated that if oil prices remain high for an extended period, the Bank of Japan might be forced to consider further interest rate hikes.
