While Japan’s long-term yield exceeded 3% and reached a level not seen in nearly 30 years, yields in the United States and the United Kingdom also remain high. Instability in the Middle East, high oil prices, and a mismatch between fiscal expansion and monetary policy are underlying factors, and developments surrounding interest-rate trends and the worsening relationship between fiscal and monetary policy are expected to continue.
Japan’s long-term interest rate, represented by the 10-year government bond yield, stood at 3.105% as of 7 October, reaching its highest level in nearly 30 years. This has raised corporate funding costs, with concerns that it could affect capital investment and corporate earnings.
The US Treasury yield rose to 5.302% on 5 October, while the UK government bond yield remained in the 5.5% range. The rise in long-term yields is analysed as resulting from the interconnected effects of inflationary pressures in the global economy and fiscal and monetary policy developments.
The background includes the prolonged instability in the Middle East and persistently high crude oil prices, with expanding fiscal deficits in countries around the world interacting with central-bank rate hikes. This has also affected foreign exchange markets, creating a pattern linked to price trends.
Many believe that it will be difficult to halt the rise in long-term yields through Japan’s efforts alone, and that improving the situation will not be easy unless the mismatch between fiscal and monetary policy is resolved. Going forward, there are concerns that inflationary pressures could intensify depending on developments in the Middle East, potentially making the fiscal and monetary policy dilemma more serious.