Japan's Borrowing Costs Hit 30-Year High Amid Inflation Fears

Japan's borrowing costs have reached a 30-year high as the country struggles to manage its finances. The yield on 10-year Japan Government Bonds (JGBs) has risen to 3%, its most expensive rate since September 1996.

In less than five years, Japan's government borrowing cost has increased by an astonishing 2,900%. Just a few years ago, in early 2022, the country could borrow for 10 years at a mere 0.1% interest rate.

The yield on JGBs across all durations is setting multi-decade records. For example, Japan pays 1.81% to borrow for two years, 2.26% for five years, and 3.8% for 20 years. The only exception is the 40-year bond, which remains slightly below its recent record.

The Bank of Japan (BOJ) raised its policy rate to 1% in June, making borrowing more expensive. Markets now expect another hike to an even higher interest rate this month. Rising inflation fears are also contributing to Japan's financial woes, with core consumer prices expected to rise above the BOJ's target.