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Highlights:
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Why Japan’s long-term rates are rising so quickly
As the BOJ announced its latest rate hike on September 18, the yield on the benchmark 10-year Japanese government bond (JGB) briefly rose to 2.945%, surpassing the 2.930% level reached the previous day.This marked the highest level in roughly 30 years, since September 1996, and reminded global audiences that a fundamental macro regime change is now well-underway in Japan, the significance of which needs to be underlined. Selling pressure also spread across super-long-term JGBs, including 20-, 30-, and 40-year maturities.
Several factors appear to be driving the increase: the BOJ’s now entrenched shift toward policy tightening, concerns about fiscal deterioration under expansionary government policies, and fears of rising inflation linked to higher crude oil prices amid worsening Middle East tensions. Rising U.S. Treasury yields, influenced by fiscal concerns, increased war-related spending, and large-scale debt issuance, have also contributed to upward pressure on yields globally, with Japan being no exception.
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