Japan’s 10-year bond yield reaches 3% for the first time in three decades

Japan’s 10-year government bond yield climbed to 3% on Tuesday, crossing a level not seen since October 1996. The move reflects growing expectations that the Bank of Japan could bring forward or accelerate its next interest-rate increase.

The yield, a key measure of long-term borrowing costs, reached 3% shortly after midday in Tokyo. Analysts cited by the report believe the central bank may act at its policy meeting in two weeks, following limited results from a joint Japanese and U.S. intervention aimed at stopping the yen’s depreciation in late July.

A further increase would be the second rate hike in three months. The BoJ raised its short-term benchmark rate to 1% at its June meeting, the highest level since 1995.

The bond market move followed meetings on Monday between U.S. Treasury Secretary Scott Bessent, Japanese Finance Minister Satsuki Katayama and BoJ Governor Kazuo Ueda on the sidelines of the G20 summit in the United States. A Treasury official quoted by public broadcaster NHK said Bessent stressed the importance of Japan showing markets its commitment to fiscal sustainability and higher interest rates.

Long-term Japanese bond yields have risen steadily, partly because of Prime Minister Sanae Takaichi’s expansionary fiscal policy. Investors have expressed concern about Japan’s reliance on debt issuance. Inflationary effects from the war in the Middle East have added pressure by driving up fuel prices and restricting the movement of goods in the region.