Japan’s 10-year government bond yield fell to around 2.33% on Wednesday, marking its third straight session of decline and tracking US Treasury yields, as investors grew wary of the Middle East conflict’s impact on global growth. Now in its fifth week, the war has roiled markets and stoked fears of a simultaneous spike in inflation and economic slowdown. However, Fed Chair Powell said that longer-term inflation expectations remain well-contained, reducing the urgency for any monetary policy response from the Fed.
Hopes of a possible de-escalation also emerged after President Trump said US forces would end operations in Iran within two to three weeks. Domestically, the Bank of Japan’s sentiment index for large manufacturers rose to 17 in Q1 2026, its highest level since late 2021, reflecting robust business confidence. Meanwhile, the Manufacturing PMI was revised up to 51.6 in March from a preliminary 51.4, though still down from February’s near four-year peak of 53.
