Japan's 10-year government bond yield, a benchmark for long-term interest rates, hit a 30-year high Thursday. Financial markets are being heavily shaken as the government of Sanae Takaichi has signaled fiscal expansion worth 10 trillion yen (about 9.451 trillion won) annually.
The 10-year Japanese government bond yield surged to as high as 2.830% intraday that day, reaching its highest level in about 30 years since October 1996. It broke the record set just three days earlier on the 3rd of this month, when the yield rose to 2.810% intraday, also the highest in 30 years.
Analysts say the fiscal expansion the Japanese government formalized late last month, the so-called "Honebuto" policy, led to a surge in yields driven by large-scale bond selling. In the original Honebuto draft, the reference to "fiscal consolidation," which had been included in the government's fiscal management principles until last year, was removed. It also set annual fiscal spending at 10 trillion yen starting next year.
The "Honebuto shock" is also putting downward pressure on the value of the yen. In the Tokyo foreign exchange market that day, the yen-dollar exchange rate rose to more than 162 yen intraday. It approached the lowest level recorded late last month in 40 years since the Plaza Accord (December 1986).
