Japan's benchmark 10-year government bond yield, a key indicator of long-term interest rates, climbed to its highest level in nearly three decades on Tuesday, driven by market speculation regarding upcoming interest rate hikes by the Bank of Japan and other factors.
The 10-year government bond yield surged to 2.945 percent, approaching the closely watched 3-percent level for the first time since October 1996, the Kyodo News reported.
The yield spike was driven by a confluence of factors, including rising U.S. long-term interest rates spilling over into Japanese markets and growing investor bets that the central bank will raise interest rates next month. The combination has accelerated selling pressure on government bonds, pushing yields steadily upward.
Adding to the complex picture, heightened uncertainty surrounding the Middle East situation has driven U.S. crude oil futures higher, stoking concerns about imported inflation in Japan. As a major energy importer, Japan is particularly vulnerable to rising global oil prices, and fears that inflationary pressures could persist have intensified the bond sell-off.
Rising long-term interest rates carry significant implications for Japan's economy, which grew by a lower-than-expected 1.1 percent in the second quarter of the year.
Higher benchmark yields will push up fixed-rate mortgage rates, adding to the financial burden on homebuyers. Corporate borrowing costs are also set to rise, potentially dampening capital investment and slowing business activity.
Japan's 10-year government bond yield hits highest level since Oct 1996
