Japan Interest Rates Surge on “Honebuto Shock”

Tokyo, July 9 (Jiji Press)--A draft of the Japanese government’s upcoming annual economic and fiscal policy guidelines, nicknamed “honebuto,” has spurred a jump in long-term interest rates, forcing the government to revise some of the wording.

The draft, released at the end of last month, reflected Prime Minister Sanae Takaichi’s emphasis on proactive fiscal policy and monetary easing. It has fueled concerns among investors that Japan may experience further fiscal deterioration and faster inflation stemming from a possible delay in interest rate hikes by the Bank of Japan.

The ensuing long-term rate jump, resulting from what market players call the “honebuto shock,” may be a sign of an increase in market distrust in the policy management of the government and the BOJ.

The yield on the most recent issue of 10-year Japanese government bonds, a key long-term interest rate, has risen to 30-year highs in interdealer trading, according to Japan Bond Trading Co. Higher long-term rates may curb corporate capital investment, chilling the economy.

In the draft honebuto guidelines, the government said that appropriate monetary policy management by the BOJ is “extremely important” to achieve a strong economy, which was perceived by market participants as a message to discourage interest rate hikes.

[Copyright The Jiji Press, Ltd.]