Foreign central banks net bought $12.829 bln of US bonds in the week to May 22, reversing net sales of $20.238 bln in the prior week.

BOK GOV SHIN said the Bank needs to closely monitor growth in leveraged investment in domestic equities.

Swap market pricing shows traders put the probability of a BOJ rate hike at about 75% for June and 92% for July. Michio Saito of Nomura Capital Markets Research Institute said the Iran war could push oil higher and weigh on energy-importing Japan, making the BOJ more cautious about tightening. Saito, who served until 2023 as a senior bond policy official at Japan’s Ministry of Finance, said, “The timing for a rate hike has actually arrived, or at least is very close… but I am not sure the BOJ policy board’s path to a hike will be smooth.” He added that JGB yields may have risen excessively amid market concerns about inflation and a possible expansion of government fiscal spending. Japan’s 10-year government bond yield briefly rose to 2.8% on May 18, its highest since 1996; Saito said that level is currently too high relative to other parts of the JGB curve and that a reasonable range for the 10-year is about 2.0%–2.5%. He warned that if the Strait of Hormuz remains closed, market worries over oil and LNG supply would intensify and, for Japan, “the risk is no longer just higher prices; economic activity itself could stall.”