The sell-off in Japanese government bonds has intensified pressure on the global debt market. Yields are rising as investors grow increasingly concerned about persistent inflation, higher oil prices and rising public spending, which could lead to a greater supply of bonds.
In Japan, the yield on 30-year government bonds briefly rose to 4.205%, reaching the highest level since the instrument was introduced in 1999. However, the pressure is not limited to the longest end of the yield curve. Weaker demand was also visible at an auction of 5-year Japanese bonds, even though they offered a record-high coupon of 2%. In the previous week, Japanese debt recorded its largest weekly decline in bond prices since April 2025.
The increase in Japanese bond yields is part of a broader global sell-off in debt markets. The yield on 10-year US Treasuries rose to 4.63%, reaching its highest level since February 2025, while yields on 30-year US bonds exceeded 5% and approached their highest levels since 2007. Bonds in Australia and New Zealand also came under pressure.
The main source of concern remains inflation risk. Rising oil prices increase the likelihood of more expensive transport, higher production costs and continued price pressure in the economy. In Japan, this problem is compounded by a weaker yen, which raises import costs and may further fuel inflation. At the same time, investors are factoring in the possibility of further interest rate increases by the Bank of Japan, which reduces the attractiveness of older bonds.
An additional source of uncertainty comes from expectations around fiscal policy. Prime Minister Sanae Takaichi has announced preparations for an additional budget in response to rising commodity prices. For the market, this means the risk of higher public spending and, consequently, a larger supply of debt. Such a scenario could push yields even higher, especially if investors conclude that fiscal and monetary policy are not sufficiently aligned in the fight against inflation.
Rising yields in Japan may have implications for the entire world. For years, Japanese investors have allocated large amounts of capital abroad, particularly into the bond markets of developed economies. If domestic debt yields continue to move closer to levels offered in other major markets, some capital may return to Japan. Such flows could, in turn, put additional upward pressure on bond yields in other countries, especially in the United States. The USD/JPY exchange rate rose today to around JPY 159.00.
The current situation shows that Japan has become one of the main sources of tension in the global bond market. Rising Japanese debt yields, inflation concerns, higher oil prices and the possibility of increased public spending have created an unfavorable mix of factors for the market. The effects may be felt far beyond Japan, particularly in the United States, where bond yields are already close to multi-year highs.
