Japan’s 10-year government bond yield climbed to around 2.67% on Tuesday, gaining for the second straight session as the yen sank to its weakest levels in four decades, supporting expectations for faster Bank of Japan policy tightening. Last week, BOJ Governor Kazuo Ueda reiterated that the central bank remains prepared to raise rates further if economic activity, inflation, and financial conditions evolve as expected. The yen has remained under pressure due to the wide interest rate gap between Japan and the US, with the Federal Reserve expected to deliver multiple rate hikes this year. Japan also remains exposed to potential energy supply disruptions because of its heavy reliance on Middle Eastern imports. On the data front, Japan’s industrial production rose less than expected in May as Middle East tensions continued to pose risks to supply chains and energy costs.

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