Japan's Bond Yield Tops 3% Amid Fiscal Concerns

Japan's benchmark 10-year government bond yield rose above 3% on Tuesday for the first time since 1996, driven by concerns over public finances and expectations of another rate hike from the Bank of Japan. The yield climbed around 6 basis points to its highest level in three decades, with bond yields moving inversely to prices.

The rise reflected growing expectations that the BOJ could raise its policy rate as early as September, with its benchmark rate currently standing at 1%. This comes amid mounting pressure on public finances as Japan prepares its fiscal 2027 budget and renewed hostilities between the US and Iran have fueled concerns over higher energy prices and global inflation.

The yen weakened beyond 160 against the US dollar for a third consecutive trading session, reviving speculation that Japanese authorities could intervene in the foreign exchange market. US Treasury Secretary Scott Bessent indicated that he expected action from both the Japanese government and the BOJ to support the currency, saying 'I have information that the market doesn't have. And it's my belief that the Japanese government and that the BOJ will do the things that will lead to a stronger yen.'