Japan 10-year government bond yield rises to highest since 2008

Japan 10-year government bond yield rises to highest since 2008

Japan's 10-year government bond yield surged to around 1.59% on Wednesday, marking its highest level since 2008. The sharp increase, which was nearly 10 basis points, followed US President Donald Trump's announcement of a new trade agreement with Japan. The agreement includes a 15% tariff on Japanese exports to the US, a $550 billion investment in the US, and the opening of Japanese markets to key American goods [1].

The announcement has sparked political uncertainty in Japan, with Prime Minister Shigeru Ishiba confirming his briefing on the negotiations but disclosing no specifics. The ruling coalition's loss of its upper house majority in the weekend elections has added to the instability, as Japan navigates growing pressure from US trade policy [2].

The yield increase reflects concerns among investors about Japan's fiscal and economic policies. Despite rising debt and fiscal pressures, 30-year Japanese government bond yields remain anchored at around 3%, thanks to inflation, a weak yen, massive domestic savings, and long-standing Bank of Japan policies [3].

Analysts expect the 10-year Japanese government bond yield to gradually rise to around 2% by the end of 2026, assuming tighter monetary policy but no dramatic yield surge [3]. The steepening yield curve, with the 10-year to 30-year spread exceeding 150 basis points, has created favorable conditions for long-term bond investments [3].

The political uncertainty and fiscal stimulus plans, including tax cuts and wider deficits, may complicate Tokyo's trade negotiations with Washington, potentially impacting market sentiment [2]. The yen could also face downside risks from the prospect of more government spending, and investors may express their concerns through the currency and bond markets [2].

References:
[1] https://www.tradingview.com/news/te_news:471897:0-japan-10-year-yield-jumps-after-us-trade-deal/
[2] https://www.bloomberg.com/news/articles/2025-07-21/japanese-bonds-stocks-vulnerable-as-unpopular-ishiba-holds-on
[3] https://m.economictimes.com/markets/bonds/weak-yen-and-boj-policy-anchor-japanese-bond-market/slideshow/122828053.cms