Japan 10-year bond yield hits 3% on rate hike hopes, fiscal fears
TOKYO (Kyodo) -- Japanese government bonds were sold across the board on Tuesday, with the yield on the benchmark 10-year bond jumping to 3.000 percen
On Tuesday, Japanese government bonds experienced a significant decline as yields on the benchmark 10-year bond surged to 3.000 percent for the first time since October 1996. This event occurred due to heightened expectations of an interest rate hike by the Bank of Japan to tackle inflationary risks, coupled with persistent concerns over the country's deteriorating fiscal health.
The benchmark 10-year bond yield crossed the crucial 3% threshold shortly after the afternoon trading session commenced, just a day after government departments submitted their budget requests for the upcoming fiscal year. These requests amounted to a staggering 143 trillion yen ($890 billion), amplifying apprehensions about Japan's fiscal stability under Prime Minister Sanae Takaichi's expansionary fiscal policy.
Bond yields also rose as concerns about inflationary pressures resurfaced after West Texas Intermediate crude oil futures breached the $85 per barrel mark due to renewed conflict between the United States and Iran. Market strategist Masahiro Ichikawa from Sumitomo Mitsui DS Asset Management Co. emphasized the crucial role of the government's response to market signals and its fiscal management in controlling the situation.
Meanwhile, the U.S. dollar traded near the upper 159 yen range in Tokyo, influenced by increased crude oil prices and deliberations by U.S. Treasury Secretary Scott Bessent, Bank of Japan Governor Kazuo Ueda, and Finance Minister Satsuki Katayama. These discussions hinted at a potential further interest rate increase by the Japanese central bank this month.
Tokyo stocks closed mixed, with investor sentiment weighed down by Middle East tensions. The Nikkei Stock Average, composed of 225 issues, fell by 96.59 points (0.15%) to 66,215.34, while the Topix index gained 25.57 points (0.62%) to 4,181.86. On the Prime Market, gains were primarily observed in electric power, gas, and mining sectors, whereas shares in the service industry and nonferrous metals experienced notable declines.
Despite a general uptick in most sectors, artificial intelligence and semiconductor-related equities experienced substantial losses, driven by concerns over their overvaluation, as noted by Wataru Akiyama, strategist at Nomura Securities Co. He suggested that the current market trend might represent a short-lived sector rotation.
Written by urgent.news from The Mainichi's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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