Japan’s 10-year government bond yield climbed to 3% on September 1, a threshold the country hasn’t touched since 1996.
The milestone caps a dramatic repricing that has added more than 1.4 percentage points to the benchmark yield since August 2025. In a country where negative interest rates were the norm just two and a half years ago, that kind of move isn’t just notable. It’s seismic.
What’s driving the sell-off
Three forces are converging on Japan’s bond market simultaneously.
First, inflation expectations have been climbing alongside oil prices, which have pushed above $85 per barrel amid ongoing geopolitical tensions. Japan imports nearly all of its energy, making it especially vulnerable to commodity-driven price pressures.
