Japan’s borrowing costs moved higher again on Tuesday, with the 10-year Japanese government bond yield rising to 3%, its highest level since September 1996.
In less than five years, the government’s cost of borrowing for 10 years has increased 2,900%. In early 2022, Japan could still raise money at just 0.1% for the same maturity.
JGB yields reach multi-decade highs across the curve
Japanese government bonds set multi-decade records across much of the yield curve. Japan is now paying 1.81% to borrow for two years, 2.26% for five years, 3.8% for 20 years, and 4.18% for 30 years.
The 40-year bond is the only maturity sitting below a multi-decade record, though only slightly. Its yield was 4.28%, compared with a recent record of 4.4% set in May 2026.
Higher yields have kept buyers engaged at government debt auctions. Tuesday’s 10-year JGB auction drew more than three bids per bond, leaving the bid ratio in line with the annual average.
High by recent standards, but not always an all-time record
The latest move represents a multi-decade high for several JGB maturities, but not necessarily a formal record across all available history. Japan’s finance ministry archives show that some government bonds offered higher yields in the 1990s.
Market data vendor Barchart described the move in the 30-year yield as a record, writing, 「Dear God!」 in a post on September 1, 2026, after the yield moved above 4.18%.
Protos noted that, technically, 30-year JGBs traded a couple of basis points higher in May 2026. It also said the formal history for that maturity only goes back to 1999, while investors in earlier years used other maturities to construct a de facto 30-year holding period.
BOJ rate hikes add to debt pressure
For years, Japan stayed out of focus for many bond traders, helped by high domestic ownership of credit, foreign exchange intervention, mandated bond purchases, and strong employment. JGBs and the yen had appeared relatively stable for an extended period.
That changed when the Bank of Japan raised its policy rate to 1% in June, the highest level in 31 years. Markets now expect another move this month, taking the rate to 1.25%.
Inflation concerns have also been building in the yen market. In its July outlook, the BOJ projected that core consumer prices would rise clearly above its target, citing factors including expensive crude oil.
The central bank said, 「The consumer price index is likely to accelerate to a level clearly above 2% from the second half of fiscal 2026.」
Yen intervention failed to stop the rise in borrowing costs
On July 31, with the yen near a 40-year low against the US dollar, the US and Japanese governments bought yen together for the first time since 1998. According to the report, US Treasury Secretary Scott Bessent used euros from the Exchange Stabilization Fund to pay for the operation.
Japan, the largest foreign holder of US debt, said it would use a Federal Reserve facility to borrow dollars against its $1.1 trillion stockpile of US Treasurys.
Tokyo’s finance ministry said, 「This joint action countered excessive volatility and disorderly movements in the Japanese yen in recent months.」 Bessent called the move 「coordinated foreign exchange actions」 against 「disorderly yen movements.」
The intervention did not hold the line. Japanese borrowing costs kept rising, and the yen weakened again 11 days later. This week, it traded back near 160 per dollar.
Debt-servicing bill set to hit a record next year
Japan’s debt-servicing costs are projected to reach a record 36.6 trillion yen, or about $230 billion, next year. That would mark a 17% increase from a year earlier.
