Japan's Ten-Year Bond Yield Hits 3.00% for First Time in Three Decades -- Update

By Ronnie Harui and Megumi Fujikawa

Japan's 10-year government bond yield hit its highest level in about three decades as U.S. Treasurys and regional bonds were sold amid higher oil prices due to Middle East tensions which fueled inflation fears and raised the prospect of tighter global monetary policy.

The 10-year JGB yield touched 3.000%, its highest intraday level since September 1996, before trimming its rise to be 2.995%, still up 5.5 basis points, according to data provider Quick.

Concerns about higher inflation--and tighter monetary policy--due to fuel prices were stoked by the latest exchange of attacks between the U.S. and Iran which prompted President Trump to say the U.S. would "hit them hard."

U.S. forces said they struck Iranian launch sites where rockets used to deploy naval mines in the Strait of Hormuz were being prepared for firing. Tehran retaliated by launching a salvo of missiles at Jordan, home to thousands of U.S. troops. All were intercepted.

"A resumption of kinetic U.S.-Iran conflict has lifted oil along with [U.S. Treasury] yields," said Vishnu Varathan, head of Macro Strategy for APAC at Mizuho Securities (Singapore), in an email. "Crucially, President Trump has warned that the U.S. will respond [to Iranian retaliation] setting up risks of antagonistic dynamics of escalation," Varathan added.

Also, JGB investors will be looking to coming debates in Japan over consumption tax cuts and the fiscal 2027 budget, which could stoke fears about the sustainability of Japan's fiscal position, said Oxford Economics economist Shigeto Nagai. That could drive government bond yields higher and weigh on the yen, Nagai added.

"We continue to believe that the yen's weakness will likely continue unless the Takaichi administration gives up their preference for the mix of expansionary fiscal policy and reluctance to support the normalization of interest rates," he said.

The dollar was recently 0.1% higher at 159.84 yen, LSEG data showed.

The yield on U.S. 10-year Treasurys rose 3 basis points to 4.7780%, near the Aug. 13 high of 4.7888%, FactSet data showed. Yields on Australia's 10-year sovereign securities advanced 9 basis points to 5.1600% and on New Zealand's 10-year government bonds gained 6 basis points to 4.7990%. Bond yields move inversely to prices.

"With Brent oil prices still overall contained but inching up above $90/barrel, markets remain slightly unsure as to how the war in the Middle East will play out and the impact to" bond yields in Asia, said Michael Wan, senior currency analyst at MUFG Bank.

"Both the [overnight index swap] and Fed fund futures markets are now pricing in for around 70% probability of a September hike" by the Fed, Wan added.

Front-month West Texas Intermediate crude oil futures were 0.8% higher at $86.45 per barrel and front-month Brent crude oil futures were 0.5% higher at $90.95 a barrel, according to ICE data.

Write to Ronnie Harui at ronnie.harui@wsj.com and Megumi Fujikawa at megumi.fujikawa@wsj.com

(END) Dow Jones Newswires

September 01, 2026 01:49 ET (05:49 GMT)