Japan's Bond Yield Hits 3% for First Time in 30 Years Amid Global Debt Concerns

Japan's benchmark bond yield has risen to 3% for the first time in 30 years, driven by investor concerns over inflation and pressure on the Bank of Japan (BOJ) to raise interest rates faster.

The 10-year JGB yield, used as a benchmark for Japanese mortgages and corporate borrowing, has more than tripled in two years. On Tuesday, it rose to 3% almost immediately after trading restarted in the afternoon session, later edging higher to 3.005%. The shorter end of the curve also saw significant increases, with the 5-year rate touching a record 2.265%, and the 2-year yield reaching a 31-year peak of 1.81%.

The spike in yields has been fueled by global debt selloffs, oil-driven inflation fears, and worsening fiscal conditions worldwide. Japan's heavy debt burden makes it particularly vulnerable to rising borrowing costs, with the government assuming a 3% long-term interest rate to calculate debt-servicing costs in its fiscal 2026 budget.

Ryutaro Kimura, senior fixed-income strategist at BNP Asset Management, noted that 'the bond market has to some extent been sounding a warning against fiscal expansion.' The BOJ's decision to raise interest rates is now seen as almost certain, with the central bank facing criticism for being 'behind the curve' in normalizing monetary policy.