BlockBeats News, September 2nd. On September 1st, the yield on Japan's 10-year government bond rose to 3%, the first time since September 1996, hitting a high of 3.005% intraday. The 5-year yield reached a record high of 2.265%, and the 2-year yield rose to a 31-year peak of 1.81%. The surge in yields was driven by three main pressures: the Middle East crisis boosting global inflation expectations, the market almost certain that the Bank of Japan will raise interest rates this month, and concerns about fiscal expansion under Prime Minister Kanemasa Manae's administration. The Japanese government had previously assumed a long-term interest rate of 3% in the FY2026 budget to calculate debt-servicing costs, but the current yield has officially surpassed this key level.

Japan is not alone. Amid the ongoing US-Iran conflict and high oil prices, global sovereign bond yields have hit multi-year highs, with US, German, and French bond yields all rising to multi-year peaks. With a debt burden exceeding 200% of GDP, Japan is particularly vulnerable to rising borrowing costs.

Ryutaro Kimura, Senior Fixed Income Strategist at BNP Asset Management, stated that the bond market has to some extent issued a warning about fiscal expansion. Finance Minister Okatsuki denied commenting on the yield approaching 3%, while Manae Kanemasa has been driving an investment-driven growth path centered on semiconductors and AI since taking office in October last year, raising concerns in the market that this could further worsen an already fragile fiscal situation.