The secondary-market yield on newly issued 10-year Japanese government bonds, the benchmark for long-term interest rates in the Tokyo bond market, briefly rose to 3.035%. The yield reached a level not seen in 30 years, with views spreading that the rise in oil prices and U.S. interest rates had spilled over into Japan.
In the Tokyo bond market on the 15th, the secondary-market yield on newly issued 10-year Japanese government bonds, the benchmark for long-term interest rates, briefly rose to 3.035%, sending bond prices lower. This was the highest level in approximately 30 years, since September 1996.
Supply concerns stemming from an attack on an oil pipeline in Saudi Arabia have been cited as a factor behind the sharp rise in oil prices. U.S. long-term interest rates rose into the 5% range on inflation concerns, spreading selling pressure to the Japanese government bond market.
Expectations surrounding the Takaichi administration’s expansionary fiscal policy and the pace of the BOJ’s rate hikes have pushed interest rates higher. The BOJ is widely expected to raise rates further to 1.25% at its Monetary Policy Meeting, which begins on the 17th. Market participants are also watching for comments at the press conference after the meeting.
Against this backdrop, observers have pointed to the importance of monitoring the outlook for interest rates and the market’s response.