Japan bond yields extend gains on inflation concerns ahead of Fed decision

Tokyo, Japan experienced a rise in government bond yields on Wednesday as inflation concerns grew due to the escalating Middle East conflict and higher oil prices. The benchmark 10-year JGB yield increased by 0.5 basis point to 3.035 per cent, following a new 30-year high on Tuesday. The 20-year and 30-year yields followed suit, climbing by 4 basis points to 3.925 per cent and 4.190 per cent respectively.

Oil prices were stuck in the mid-US$100-a-barrel range, after shipping industry sources reported that crude loadings at Saudi Arabia's Red Sea export hub of Yanbu were suspended and Riyadh had canceled some cargo deliveries to European customers. The U.S. 10-year Treasury note yield rose to 5.004 per cent, its highest since July 2007.

The Federal Reserve is expected to announce its policy decision at 2pm EDT (1800 GMT) on Wednesday, following a two-day meeting. Financial markets expect the U.S. central bank to raise its benchmark rate by 0.25 percentage points, bringing it into a 3.75 per cent-4.00 per cent range, and signal further tightening. Japan's Yomiuri newspaper reported that Prime Minister Sanae Takaichi might retain Minoru Kiuchi as the minister in charge of economic revitalisation in a cabinet reshuffle scheduled for Thursday.

Some market participants believe that Kiuchi's possible replacement could provide clues about whether Takaichi will rein in her spending plans, potentially impacting the recent bond selloff.