Japan's 10-Year Bond Yield Hits 30-Year Peak Amid Inflation Fears

On September 25, Japan's benchmark 10-year government bond yield reached 3.115%, its highest point since August 1996, according to Japan Bond Trading Co. The increase followed a broad sell-off of Japanese bonds as investors grew uneasy about the prospect of inflation driven by rising oil prices. Parallel hikes in U.S. long-term yields and European bond markets added further upward pressure. The situation was exacerbated by a recent Houthi rebel attack on Saudi Arabia, which is expected to push oil prices higher and feed consumer-price inflation.

Takuya Onizawa, a bond strategist at Mitsubishi UFJ Morgan Stanley Securities, said the confluence of these factors could prompt the Bank of Japan to keep raising rates. Persistently higher long-term yields are set to raise fixed-rate mortgage rates and increase the cost of corporate financing.