TOKYO - The yield on Japan's benchmark 10-year government bond briefly rose to 2.900 percent on Thursday, its highest level in over 29 years, on fears over a flare-up of tensions in the Middle East.
Government bonds were sold as renewed attacks between the United States and Iran drove crude oil futures higher, fueling inflation concerns in Japan, which relies heavily on energy imports. Bond yields move inversely to prices.
The key barometer of long-term interest rates ended Thursday up 0.010 percentage point from Wednesday's close at 2.875 percent after rising to its highest level since November 1996.
"Higher crude oil prices have also pushed up U.S. Treasury yields, making the impact global," said Takuya Onizawa, a bond strategist at Mitsubishi UFJ Morgan Stanley Securities.
Lingering worries about Japan's fiscal health under Prime Minister Sanae Takaichi's "responsible and proactive" fiscal policy also kept government bonds under pressure.
Concerns remain that the government may pressure the Bank of Japan not to raise interest rates after the draft for the economic policy blueprint last week sparked such a view.
"There was no need to mention (monetary) policy in the policy blueprint in the first place," said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management Co.
The draft said the "appropriate management" of monetary policy is "extremely important" for "strong economic growth." According to sources familiar with the matter, the government is considering changing the wording.
Revising the wording to imply that the government did not want investors to worry about monetary policy would "make the market more suspicious," Ichikawa said.
The U.S. dollar was steady against the yen in Tokyo, supported by the rekindled concerns over the Middle East.
But it remained top-heavy around 162.50 yen due to concerns that Japanese authorities could move to intervene to prevent the yen from dropping further, dealers said.
At 5 p.m., the dollar fetched 162.34-36 yen compared with 162.58-68 yen in New York and 162.21-22 yen in Tokyo at 5 p.m. Wednesday.
The euro was quoted at $1.1435-1436 and 185.64-68 yen against $1.1410-1420 and 185.57-67 yen in New York and $1.1425-1427 and 185.33-37 yen in Tokyo late Wednesday afternoon.
Tokyo stocks ended higher despite concerns over the Middle East situation, with the key Nikkei index briefly rising over 2 percent.
The 225-issue Nikkei Stock Average gained 924.80 points, or 1.38 percent, from Wednesday to 67,743.85. The broader Topix index finished 13.94 points, or 0.35 percent, higher at 4,020.37.
Heavyweight semiconductor-related shares rose sharply following overnight rises in their U.S. counterparts.
Expectations for stronger chip demand grew following reports that China plans to allow its top AI companies to buy a limited number of Nvidia's H200 chips, brokers said.
