TOKYO - Japan's benchmark long-term interest rate briefly climbed to 2.95% on August 31, its highest level in about 30 years, as investors sold government bonds on expectations of further Bank of Japan rate increases, rising U.S. yields and concerns over the outlook for government spending.
Bond prices and yields move in opposite directions, meaning yields rise when government bonds are sold and their prices fall.
The yield on the benchmark 10-year Japanese government bond briefly reached 2.95%, reflecting persistent market expectations that the Bank of Japan could raise interest rates again at an early stage.
Global trends also contributed to the rise. Expectations of higher U.S. interest rates strengthened following a speech by Federal Reserve Chair Warsh late last week, pushing U.S. long-term yields higher and adding to upward pressure on interest rates worldwide.
Investors are also watching domestic fiscal developments for further signs of pressure on Japanese government bonds.
August 31 is the deadline for ministries and agencies to submit their budget requests for the next fiscal year to the Finance Ministry, with the total expected to reach a record high.
If markets become less confident that Japan can maintain fiscal discipline, selling of government bonds could intensify further, putting additional upward pressure on long-term interest rates.
Source: TBS
