Japan's Bond Yield Hits 3% for First Time Since 1996

Japan's benchmark 10-year bond yield has hit 3% for the first time since September 1996, pushed higher by investor concerns about inflation and pressure on the central bank to raise interest rates faster. The spike in yields is a sign of growing doubts about Prime Minister Sanae Takaichi's ability to balance fiscal responsibility with ambitions to invest in strategic areas.

The benchmark yield rose to 3% immediately after trading restarted, and later edged higher to 3.005%. The 5-year JGB rate touched a record 2.265%, while the 2-year yield reached a 31-year peak of 1.81%. This signals that markets are pricing in a near certainty of interest rate hikes at the Bank of Japan's meeting this month.

The bond selloff has drawn attention due to Japan's heavy debt burden, making it vulnerable to rising borrowing costs. Finance Minister Satsuki Katayama declined to comment on the benchmark yield approaching 3% after the first day of the G20 finance leaders meeting. The government assumed a 3% long-term interest rate in its fiscal 2026 budget, and a move above that level would add strain to the country's finances.