Japan 30 Year Bond Yield

The government bond market is the hot topic in global finance after 30-year US Treasury yields climbed to their highest level since the subprime crisis in 2007, while 10-year yields edge ever closer to 5%, also the highest since 2007, excluding the period of rate hikes by the US central bank, the Fed, in 2023. Japan is facing significantly elevated bond yields as well, with 10-year Japanese government bond yields breaking through 3% to set a new 30-year high, as did 30-year Japanese government bond yields. The main driver is that markets are questioning the credibility of borrowing countries amid sharply higher public debt across all countries since the COVID-19 crisis. US public debt now stands at a record 40 trillion dollars, roughly 120% of GDP, while Japan's public debt is as high as about 200% of GDP. Both countries also plan continued fiscal deficits amid the Fed's high interest rates and the Bank of Japan's upward interest rate trend, which will further compound the growth of public debt. Some investors are selling bonds and adjusting their portfolios, with knock-on effects pressuring both the US dollar and the Japanese yen toward weakness in recent months. And it is not only the US and Japan: other countries whose public debt has risen sharply and sits at high levels face similar risks.

Dr. Amonthep Chawala, Assistant Managing Director and Head of Research at CIMB Thai Bank, warned that the bond market could explode, as the market does not believe the US government will stop accumulating debt and may punish it by demanding higher interest rates. Despite the US Treasury Secretary's measures to suppress long-term bond yields, the market remains unconvinced, with the 30-year US Treasury yield surging above 5.28% and showing signs of further increases. Additionally, he highlighted the 30-year Japanese government bond yield, which has risen from 3% at the start of the year to above 4%, and may continue to climb if the Bank of Japan's rate hikes are insufficient. Meanwhile, Japan's public debt exceeds 200% of GDP, which could lead to a sell-off in US Treasuries and put pressure on global yields. The impact of higher yields will increase financing costs for businesses and home loans, as well as reduce asset values, but it has not yet reached a financial crisis level, unless additional triggers emerge, such as a decline in AI investment or rising unemployment. Therefore, he advises investors to diversify their investment portfolios.

Japan's 10-year government bond yield touched 2.945%, its highest since September 1996, while the yen slipped back toward 159 per dollar. The 30-year yield hit 4.115% the same morning, and core inflation rose to 1.8% in July from 1.6% in June. Economists expect the Bank of Japan to lift its policy rate from 1% to 1.25% at its September 17-18 meeting. Bitcoin has ignored the stress, up 22% in seven days near $77,355, though analysts warn a yen surge could unwind carry trades as in August 2024.

The yield on Japan's 10-year government bond climbed to 2.93 percent, the highest level since 1996, amid fiscal concerns and growing expectations that the Bank of Japan may raise interest rates in the coming months. The 10-year yield rose as much as 0.055 percentage point, while the 30-year yield gained 0.05 percentage point to 4.06 percent, near its highest since its launch in 1999. Sources said the government of Prime Minister Sanae Takaichi supports a near-term rate hike by the BOJ, with the next move expected in September or October. Meanwhile, data released today showed Japan's economy grew more slowly than expected in the second quarter, with real gross domestic product expanding 1.1 percent compared with a market forecast of 2.0 percent.