Japan's Bond Yields Smash 30-Year High, Global Economy at Risk

The yield of Japan's 10-year government bond (JGB) has exceeded 3% for the first time in 30 years, sparking concerns about global economic stability. According to Nomura Research Institute, the rise in JGB yields is primarily driven by domestic factors, including expectations of monetary policy normalization and fiscal risks.

The report warns that the combination of Japan's fiscal risks and expectations for monetary policy normalization is spreading globally through the bond market, posing a systematic threat to tech stocks, AI investment, and even the real economy. The yield of 10-year JGBs has risen by about 1.4 percentage points cumulatively over the past year, with the majority of the increase attributed to fiscal risk premium.

Takahide Kiuchi, executive economist at Nomura Research Institute, believes that if the rise in long-term interest rates is mainly caused by fiscal risks, it will often have a substantial negative impact on economic activities. The report also notes that the Trump administration has begun to intervene in Japan's economic policies, urging the Bank of Japan to raise interest rates and the Kishida administration to scale back its fiscal expansion stance.