Yields Surge to 30-Year High
On September 1, the 10-year Japanese government bond yield reached 3.005%, its highest point since September 1996. The increase was sparked by anticipated Bank of Japan rate hikes, but also by mounting worries about the nation's fiscal health, which prompted investors to offload JGBs.[S1]
Record Budget Requests Fuel Fiscal Fears
The Ministry of Finance's budget requests for fiscal 2027, due by August 31, are projected to hit a record ¥143 trillion or more. The swelling budget stems from higher social security costs due to an aging population, increased interest payments on national debt, and new funds for growth areas. Additionally, the plan to reduce the consumption tax on food without specifying how to cover the revenue gap eroded market confidence.[S1]
Global and Geopolitical Pressures
Spillover from the United States also contributed, as long-term rates there climbed on expectations that the Federal Reserve might hike rates before year-end. Ongoing worries about Middle East instability could push energy prices up, feeding into inflation.[S1]
