Japan’s 10-year government bond yield dropped below 2.1% on Monday, hitting a seven-week low as escalating Middle East tensions boosted demand for safe-haven bonds. The US and Israel carried out military strikes on Iran over the weekend that resulted in the death of Iran’s Supreme Leader, Ayatollah Ali Khamenei, and the effective closure of the Strait of Hormuz. Tehran retaliated by targeting US assets across the region, raising concerns of a broader conflict. Investors also continued to weigh the outlook for Bank of Japan monetary policy after the government nominated two reflationist academics to the central bank’s policy board, while PM Sanae Takaichi reportedly voiced concerns about additional rate hikes during a meeting with Governor Kazuo Ueda. BOJ officials pushed back, with Ueda stating that economic data would be carefully evaluated at the March and April meetings before any rate decisions, leaving the door open for a near-term hike.
