TOKYO - The yield on Japan's benchmark 10-year government bond jumped to 3.000 percent on Tuesday for the first time since October 1996, amid growing expectations for another interest rate hike by the Bank of Japan to curb inflationary risks and persistent concern about the country's worsening fiscal health.
Japanese government bond yields have tracked gains in U.S. Treasury yields, as inflation concerns reemerged after the benchmark West Texas Intermediate crude oil futures contract topped $85 per barrel following the resumption of fighting between the United States and Iran.
Behind the uptick in U.S. borrowing costs were perceived hawkish comments Friday by Federal Reserve Chair Kevin Warsh in his first speech at the Fed's annual conference, which pushed Japanese government bond yields higher in tandem.
Japan's recent coordinated currency intervention with the United States has failed to reverse the yen's persistent weakness, while U.S. Treasury Secretary Scott Bessent has also reportedly expressed hopes for further interest rate hikes in Japan.
The barometer of long-term interest rates crossed the key threshold a day after the estimated size of budgetary requests submitted by government departments for the next fiscal year stood at a record 143 trillion yen ($890 billion).
While the figure may change, it still reflects Prime Minister Sanae Takaichi's drive to ramp up spending to strengthen the economy, despite the heavily indebted nation's fiscal limitations.
Higher bond yields mean higher debt-servicing costs for Japan. The country's fiscal health is the worst among advanced economies, with outstanding debt twice the size of its economy.
