SHOCKING RISE: Japan’s Borrowing Costs SKYROCKET to a 16-Year HIGH!
Hold onto your wallets, because Japan’s financial landscape is shaking! On Thursday, the yield on the 10-year Japanese government bond (JGB) skyrocketed by a staggering 0.06 percentage points, reaching a jaw-dropping 1.5%—the highest it’s seen since 2009! Can you believe it? This explosive uptick marks a meteoric 0.4 percentage point leap since the start of 2025.
Why the sudden frenzy? It’s all thanks to Germany’s bombshell announcement to massively ramp up its defense spending! The global bond market is in panic mode, and Tokyo is feeling the heat.
Germany just experienced its biggest hike in borrowing costs in an eye-watering 28 years after a historic deal saw political parties unite to throw hundreds of billions of euros at defense and infrastructure. It’s a wild ride, folks, and Japan is not getting left behind as yields everywhere, including the UK, go through the roof on government spending plans!
Traders are buzzing with uncertainty in Asia, claiming this volatility is driven by raw market sentiment. Who’s behind this selling spree? It’s a mystery wrapped in an enigma, especially with major banks usually gobbling up JGBs like candy towards the end of the financial year!
As if that wasn’t enough, experts are pointing fingers at “contagion” from Germany while also highlighting a dramatic “shift in views towards Japan.” Yes, economic growth is blazing ahead, inflation is creeping higher, and market expectations are swirling around the Bank of Japan (BoJ) considering even tougher monetary policies.
The BOJ has already rolled the dice twice in the past year by raising interest rates, trying to pull away from years of rock-bottom rates. And guess what? Thursday’s rise is just the latest in a relentless wave of JGB yield increases aligning with Japan’s inflation which continues to trample over the central bank’s 2% target!
In a thrilling twist, the BOJ’s deputy governor, Shinichi Uchida, recently lit the fire by warning of global economic ripples and rising geopolitical tensions that could spark chaos! As tensions rise, eyes are glued on the next BOJ meeting, with traders placing bets on an imminent interest rate rise—which could happen as early as next week! But the majority of economists are betting on July.
Through all this turbulence, the yen has been steady, clinging to about ¥149.2 against the US dollar. Meanwhile, the Japanese stock market showed some resilience, with the Topix benchmark jumping 1.2%. But that’s not all—the nation’s biggest defense manufacturers, Mitsubishi Heavy and Kawasaki Heavy, exploded with 10% and 9.8% gains respectively! With predictions soaring for increased military funding, who knows where this will end!
Buckle up, folks! The financial rollercoaster is just getting started!
photo credit: www.ft.com
