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

Japan's benchmark bond yield has risen to 3% for the first time in 30 years, pushed higher by investor concerns about inflation and pressure on the Bank of Japan to hike interest rates faster.

The 10-year JGB yield, used as a benchmark for mortgages and corporate borrowing, has more than tripled in two years. The five-year rate is at a record high of 2.265%, and the two-year yield is at a 31-year peak of 1.795%.

Ryutaro Kimura, senior fixed income strategist at BNP Asset Management, said 'through the rise in yields so far, the bond market has to some extent been sounding a warning against fiscal expansion.'

The government assumed a 3% long-term interest rate to calculate debt-servicing costs in Japan's fiscal 2026 budget, and a move above that level would add further strain to the country's finances.