The benchmark 10-year JGB yield rose 6 basis points (bps) to 2.12%. The two-year yield rose 3.5 bps to 1.25% and the five-year yield rose 5.5 bps to 1.585%.
U.S. Treasury yields rose on Monday after military strikes by the U.S. and Israel in Iran and retaliatory strikes by Tehran across the Middle East sent oil and gas prices higher and fueled fears of rising inflation.
Japanese government bond yields rose on Tuesday. Fears of a long war between Iran, the US and Israel are driving up energy prices. This is expected to accelerate global inflation. Japan, which relies heavily on energy imports, faces significant impacts. Market players are speculating that the Bank of Japan may raise interest rates sooner than expected to combat rising rates.
“A rise in US Treasury yields is weighing on JGBs,” said Naoya Hasegawa, bond strategist at Okasan Securities.
Japan, which relies heavily on energy imports, will be hit hard by higher energy prices, raising bets that the Bank of Japan will raise interest rates soon to combat inflation, some market players said.
On Monday, BOJ Vice Governor Ryuzo Himino said market volatility would not prevent a rate hike, but he gave no indication of timing, saying the decision would depend on inflation stabilizing around the central bank’s 2% target.
JGB yields fell sharply in the previous session as investors bought safe havens in the wake of the Iran war. The Japanese government is scheduled to auction 260 billion yen ($1.65 billion) worth of 10-year bonds later Tuesday.
The 30-year yield rose 3.5 bps to 3.31%. ($1 = 157.4900 yen).
