Middle East Heats Up, Japanese Bond Yields Highest Since 1996

JAKARTA - The yield on Japanese government bonds with a 10-year tenor touched 2.900 percent on Thursday afternoon. This is the highest level since November 1996, when the market again became concerned about tensions in the Middle East.

Kyodo News, quoted Thursday, July 9, reported that Japanese government bonds were widely sold by investors after a new attack between the United States and Iran pushed up the price of crude oil futures. This situation triggered concerns about inflation in Japan, a country with few natural resources that is highly dependent on energy imports.

For Japan, the spike in oil prices is not a small matter. When energy costs rise, the prices of goods and production costs can also rise.

From within the country, investors are still concerned about Japan's fiscal condition. Kyodo News said, concerns about Japan's fiscal health under Prime Minister Sanae Takaichi's "responsible proactive" fiscal policy accelerated bond selling.

Government bonds are the country's debt instruments. The yield is the rate of profit that investors demand from bonds. In the bond market, prices and yields move in opposite directions. When bond prices fall because many investors are released, the yield rises.

In the foreign exchange market, the US dollar remained strong. The currency was mostly traded in the mid-162 yen range in Tokyo.

According to dealers quoted by Kyodo News, new concerns about the Middle East situation prompted market participants to buy dollars.

However, the weakening in the bond and yen markets did not immediately knock down Japanese stocks. The Nikkei 225 index remained strong and even rose more than 2 percent.

The increase was supported by large shares related to chips or semiconductors. Investors are still optimistic about the prospects for chip company growth.