TOKYO - The yield on Japan’s benchmark newly issued 10-year government bond rose to 2.60% in the Tokyo bond market on May 13th, marking its highest level in approximately 29 years since June 1997.
Bonds came under selling pressure as expectations for interest rate cuts by the U.S. Federal Reserve weakened, while rising crude oil prices fueled concerns over inflation. The move pushed Japan’s long-term interest rates sharply higher.
Japan’s long-term interest rates have climbed steadily over the past year as the country moved away from decades of ultra-low monetary policy and investors adjusted to persistent inflation both at home and overseas. The yield on the benchmark 10-year Japanese government bond, which spent years near zero under the Bank of Japan’s yield curve control policy, was trading around 0.9% in mid-2025 before gradually pushing above 1% as speculation grew that the central bank would continue normalizing policy after ending negative interest rates in 2024.
Pressure intensified through the second half of 2025 as wages continued rising and core consumer inflation remained above the Bank of Japan’s long-standing 2% target. Investors increasingly began pricing in the possibility of additional rate hikes by the BOJ, while global bond markets were also shaken by uncertainty surrounding U.S. monetary policy. Rising U.S. Treasury yields often spilled over into Japanese markets, encouraging investors to sell Japanese government bonds as well.
By late 2025, Japan’s 10-year yield had moved into the 1.5% range, levels not seen in more than a decade. The rise accelerated in early 2026 as crude oil prices climbed and fears of imported inflation spread through Asia. Stronger-than-expected U.S. economic data reduced expectations that the Federal Reserve would aggressively cut interest rates, keeping global borrowing costs elevated and putting further upward pressure on Japanese yields.
The Bank of Japan attempted to calm markets by conducting bond-buying operations, but investors increasingly tested the central bank’s willingness to tolerate higher rates. Financial institutions, which had long struggled with razor-thin margins during the era of near-zero rates, began benefiting from improved lending spreads, while higher borrowing costs started affecting mortgage rates and corporate financing conditions.
Source: テレ東BIZ
