The yield on newly issued 10-year Japanese government bonds in the Tokyo bond market rose to 3.005%. The rate reached a level last seen 30 years ago, in 1996, amid concerns over fiscal expansion and expectations of a Bank of Japan rate hike.
In Tokyo bond trading on the 1st, the secondary-market yield on newly issued 10-year Japanese government bonds, a benchmark for long-term interest rates, rose to 3.005%. Bond prices fell, sending the yield to its highest level in 30 years.
The market has attributed the rise in long-term interest rates to concerns over fiscal expansion under the Takaichi (高市) administration and expectations that the Bank of Japan will accelerate the pace of rate hikes. The Ministry of Finance closed preliminary budget requests for fiscal 2027 at the end of August, with the total expected to exceed ¥143 trillion, the largest amount on record.
Movements in long-term interest rates are considered to affect fixed-rate personal loans, including mortgages, as well as long-term corporate borrowing costs. Market participants increasingly believe that bond issuance will rise as fiscal discipline deteriorates, given the lack of clarity over funding for a reduction in the consumption tax on food products.
Most of the market expects the Bank of Japan to raise rates at its September monetary policy meeting, about 3 months after its previous hike. Expectations of a Federal Reserve rate hike within the year have also been cited as a factor pushing up long-term interest rates. Some market participants say the rate could rise to around 3.3% by the end of the year.