Japan Key Long-Term Rate Hits 30-Year High of 3.005 Pct

Tokyo, Sept. 1 (Jiji Press)–The yield on the most recent 10-year Japanese government bond issue, regarded as the country’s key long-term interest rate, rose to a 30-year high of 3.005 pct in Tokyo interdealer trading Tuesday. The reading was the highest since September 1996, according to Japan Bond Trading Co. JGBs came under fresh selling amid concerns over Japan’s fiscal health due to Prime Minister Sanae Takaichi’s expansionary fiscal policy, with general-account budget requests from government agencies and ministries for fiscal 2027 believed to have totaled a record high above 143 trillion yen. Also behind the yield rise are expectations that the Bank of Japan will increase the pace of its interest rate hikes. Long-term interest rates are seen as a barometer of the economy because their movements, which affect interest rates for fixed-rate housing loans and long-term corporate borrowings, reflect market views on economic conditions and inflation. The size of the fiscal 2027 budget requests expanded due to the creation of an investment quota for which no cap was set for fund requests and an increase in the state’s debt-servicing costs. In addition, financial resources for a planned consumption tax rate cut for food items remain unclear, leading to JGB sales owing to the view that bond issues will increase because of weaker fiscal discipline. “No investors want to buy JGBs in the face of the Takaichi administration’s expansionary fiscal policy,” an official at a foreign asset management firm said. Many financial market players expect the BOJ will decide to raise the policy interest rate for the first time in roughly three months at its Sept. 17-18 monetary policy meeting, as concerns about accelerated inflation persist amid higher crude oil prices reflecting continuing tensions in the Middle East. Investors previously expected the central bank to raise the policy rate once about every six months. The view that the pace of rate hikes will accelerate is now spreading, however, helping push up long-term interest rates. The rise in the 10-year JGB yield also reflects higher U.S. long-term interest rates attributable to speculation that the U.S. Federal Reserve will carry out an interest rate hike by year-end. “The key (Japanese) long-term interest rate may rise to around 3.3 pct within this year,” a Japanese brokerage house official said. END [Copyright The Jiji Press, Ltd.]