Japan’s Long-Term Interest Rates Hit 30-Year High of 3%

Record Budget Requests Fuel Fears Over Fiscal Discipline

On September 1, the yield on 10-year Japanese government bonds rose to 3.005%. This is the highest level for this benchmark for long-term interest rates since September 1996. While expectations of interest rate hikes by the Bank of Japan triggered the surge, growing concerns over deteriorating fiscal health also fueled a sell-off in JGBs.

The Ministry of Finance’s annual budget requests for fiscal 2027, due to be submitted no later than August 31, are expected to reach a record total of over ¥143 trillion. The expanding budget reflects rising social security costs driven by the aging population, higher interest payments on national debt, and the creation of new earmarked funds for growth sectors. Meanwhile, the decision to cut the consumption tax on food without identifying how to fill in the fiscal shortfall heightened market distrust.

Ripple effects from the United States also played a role, as long-term interest rates surged there on speculation that the Federal Reserve would raise rates before the end of the year. Meanwhile, persistent concerns remain that ongoing instability in the Middle East will lead to elevated energy prices feeding into inflation.

Data Sources

• Data on government bond yields from the Ministry of Finance
• Historical yield data (Japanese) from Japan Bond Trading

(Translated from Japanese. Banner photo: A monitor displays the yield on newly issued 10-year Japanese government bonds reaching 3.000% on the afternoon of September 1, 2026, in Chūō, Tokyo. © Kyōdō.)