Japan raises 10-year bond coupon rate to 3.1 percent
The Japanese government has raised the coupon rate for new 10-year Japanese government bonds to 3.1%, marking the highest level in roughly three decades. The Finance Ministry announced this increase on Tuesday, citing recent surges in long-term interest rates as the primary driver.
The coupon rate, which represents the interest rate specified at the time of bond issuance, increased from 2.7% in the previous auction held in September. This adjustment comes amid rising global oil prices and concerns over inflation, compounded by upward pressure on U.S. long-term interest rates, which has had a spillover effect in Japan.
The yield on Japan’s newest 10-year government bonds surpassed 3.0% on September 1 for the first time in about 30 years, reaching a peak of 3.115% on September 25. The coupon rate is typically revised every three months, having been set at 2.1% for January-March, 2.4% for April-June, and 2.7% for July-September.
In a bond auction held later on Tuesday, the No. 384 issue of benchmark long-term bonds attracted 7,401.1 billion yen ($46.6 billion) in bids, with the ministry accepting 1,966.1 billion yen. The bonds are set to be issued on Wednesday and will mature on September 20, 2036.
Under the Bank of Japan’s monetary easing policy, the coupon rate for 10-year government bonds remained below 1% from 2013 to 2024. However, higher interest rates are expected to increase the government’s debt-servicing costs, potentially straining the fiscal health of Japan, which carries significant national debt.