21.07.202603:34:27UTC+00Japan 10Y Yield Tracks US Treasury Yields Higher

Japan’s 10-year government bond yield climbed to around 2.73% on Tuesday, extending its recent advance in tandem with rising US Treasury yields. The move followed an escalation in hostilities between the United States and Iran that pushed oil prices higher, reigniting concerns about inflation and the prospect of further interest rate increases.

US strikes on Iranian targets entered a tenth consecutive day, while President Donald Trump warned that Tehran would be held accountable for the deaths of three US service members. Given Japan’s heavy reliance on energy imports from the Middle East, the country is particularly exposed to potential supply disruptions.

Against this backdrop, markets are increasingly pricing in the risk that higher energy costs will accelerate inflation in Japan and force the Bank of Japan to raise interest rates more aggressively. The yen’s weakness—hovering near a 40-year low against the US dollar—is also amplifying imported inflation, further bolstering expectations for BOJ policy tightening.