Japan’s 10-year government bond yield declined to around 2.65% on Friday, reaching a two-week low amid increased uncertainty over the near-term outlook for monetary policy from the Bank of Japan. Reports that the US and Iran have reached a tentative agreement also eased concerns about inflation and interest rates, pulling global bond yields lower. Earlier in the week, BOJ Governor Kazuo Ueda highlighted rising inflation risks linked to higher oil prices but refrained from signaling whether a rate hike could be considered at the upcoming policy meeting. He emphasized the need to closely assess how energy-driven price pressures may affect Japan’s underlying inflation trend, without offering clear guidance on the timing of any policy shift. Meanwhile, recent data showed Japan’s retail sales growing at the fastest pace in a year, while industrial production unexpectedly rose, underscoring a mixed but generally resilient domestic economic backdrop.

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