BOJ Holds Rates Steady Amid Inflation Risks and Suspected Yen Intervention

Japan's 10-year government bond yield slipped below 2.8% on Friday after the Bank of Japan left its policy rate unchanged at 1%. This move came as expected, but it still kept borrowing costs at their highest level since September 1995 following a 25-basis-point rate hike in June.

The BOJ acknowledged upside inflation risks driven by demand-related price pressures linked to the conflict in the Middle East. The yen rallied sharply amid suspected intervention by Tokyo, easing pressure on the BOJ to tighten monetary policy more aggressively to support the currency.

Japanese financial assets have faced significant pressure this month from elevated energy prices, mounting fiscal concerns, and wide interest rate differentials, driving the yen to a 40-year low and the benchmark 10-year JGB yield to a 30-year high earlier this month.