Japan Bonds Hit 3%: Companies Respond with Asset Sales, Overseas Funding

Japanese government bond yields have surged to their highest level in three decades, prompting companies to seek asset sales and overseas funding. The 10-year government bond yield broke through 3% this week, a milestone not reached since 1996.

The Bank of Japan's (BOJ) extended negative interest rate policy has been a boon for companies that have grown accustomed to low borrowing costs. However, the upward trajectory in yields is unlikely to reverse easily, especially with US pressure on Japan to raise rates.

Companies are now facing significantly higher interest burdens when refinancing maturing debt, eroding profitability and affecting capital expenditure plans. Toyota Motor and Tohoku Electric Power estimate that refinancing yen-denominated bonds would increase annual interest costs by more than 30% compared to current levels.