Japanese Government Bond futures declined Tuesday as investors grappled with inflation concerns stemming from rising crude oil prices. The commodity surge has sparked expectations that the Bank of Japan might accelerate its pace of interest rate hikes. This shift in sentiment comes amid growing speculation about the central bank's next monetary policy move.

Markets are now pricing a 70% probability of a BOJ rate increase in June, according to Barclays research. This represents a significant shift in expectations as inflation pressures build. The acceleration in rate hike pricing reflects how quickly market sentiment can change amid shifting economic conditions and policy signals from the central bank.

Adding to potential market volatility, U.S. Treasury Secretary Bessent is scheduled to meet with Japanese Prime Minister Takaichi, Finance Minister Katayama, and BOJ Governor Ueda during his visit. These high-level discussions could generate headlines related to BOJ policy or fiscal management, creating additional uncertainty for bond markets.

The benchmark 10-year JGB futures fell 0.05 yen to 129.65 yen, indicating a slight but notable decline in Japanese government debt prices. The downward pressure reflects how inflation concerns and potential policy shifts are already impacting the market, with investors adjusting their positions ahead of potential BOJ action.