The yield on newly issued 10-year Japanese government bonds briefly exceeded 3.000% in the Tokyo bond market on 1 September, reaching its highest level in approximately 30 years. The move reflected a combination of expectations of rate hikes in Japan and the US, higher oil prices driven by Middle East risks, expectations of an additional BOJ rate hike and domestic fiscal concerns.
The yield on newly issued 10-year Japanese government bonds briefly exceeded 3.000% on 1 September, reaching its highest level since October 1996. A combination of domestic and overseas factors is affecting the market, which has been setting new records almost daily.
Overseas factors included expectations of early rate hikes in Japan and the US, a continuing uptrend in US long-term interest rates, rising Middle East risks and higher oil prices. These factors heightened concerns over inflation and prompted selling of government bonds in both the Japanese and US markets. Domestically, expectations of an additional BOJ rate hike have become the market's focus, creating upward pressure on long-term interest rates.
Concerns over deteriorating domestic public finances are also pushing up long-term interest rates. The total amount of budget requests for the fiscal 2027 budget is expected to exceed ¥143 trillion, setting a new record high. Expectations of a shift in BOJ monetary policy and concerns over fiscal soundness could lead to a further rise in interest rates.
Related information includes continued reporting in past articles on fiscal and interest rate trends. Market attention is expected to remain focused on developments in the market and the BOJ's policy decisions.