Long-term interest rates rose against the backdrop of the Bank of Japan's end to prolonged easing. The burden of interest payments on the government is increasingly likely to rise, prompting a reassessment of the history of past monetary easing and the 4 principles of fiscal management.
The objectives of prolonged monetary easing were to overcome deflation and revive the economy, against a backdrop of insufficient demand and low inflation following the collapse of the asset-price bubble in the late 1980s. The Bank of Japan sought to overcome deflation by lowering interest rates, making it easier for businesses and households to raise funds and stimulating demand.
As a result, the zero-interest-rate policy was introduced in 1999, followed by the launch of quantitative easing in 2001. In 2013, the Bank of Japan introduced quantitative and qualitative monetary easing (unconventional monetary easing) and sought to lower interest rates across the yield curve through large-scale purchases of Japanese government bonds.
The negative interest rate policy was introduced in 2016, followed by the adoption of yield curve control (YCC) in September of the same year. As a result of these policies, the government was able to continue issuing Japanese government bonds at extremely low interest rates for an extended period.
In March 2024, the Bank of Japan ended its negative interest rate policy and YCC, moving toward monetary policy normalization. Long-term interest rates subsequently rose, and in September 2026 the 10-year Japanese government bond yield reached around 3.1%, its highest level since 1996.