JGB yields hit 30-year highs on inflation, fiscal concerns

TOKYO: Japanese government bond yields hit 30-year highs on Wednesday as investors worried that rising inflation and heavy spending plans could strain public finances. The rise also came after local media reported the government was considering tweaking language on monetary policy in its policy blueprint unveiled last month. The 10-year JGB yield rose as much as 2.5 basis points (bps) to 2.865% and the 20-year JGB yield rose 4 basis points to 3.85%, hitting their highest levels since September 1996 and July 1996, respectively. JGB yields have risen since the government outlined large spending plans in the policy blueprint last month. The blueprint called on the Bank of Japan to align monetary policy with growth efforts, which analysts say meant the central bank may be slow to raise interest rates as inflation pressure builds. “The change of the language seems to be just cheap tricks,” said Eiichiro Miura, senior general manager of investments at Nissay Asset Management. “To begin with, the market is cautious about the stance of Prime Minister Sanae Takaichi’s administration, which is trying to delay the BOJ’s interest rate hikes.” Economy Minister Minoru Kiuchi, who oversees the compilation of the blueprint, said market perception that the blueprint intended to keep BOJ rate hikes in check was a misunderstanding. Investors are also concerned about Japan’s fiscal health, with the country planning more than 370 trillion yen ($2.28 trillion) in combined public and private investment through fiscal 2040. The 30-year bond yield rose 3 bps to 3.97%. The two-year yield rose 2 bps to 1.42%. The five-year yield rose 2 bps to 1.975%.