Japan 30-year government bond yields break through 3.15% for the first time in history...“Signal of a complex crisis”

Japan, which is breaking away from the low interest rate amid a complex economic crisis (Source: NYT)

The interest rate of Japan's 30-year treasury bonds exceeded 3.15% for the first time in history, setting off a warning light in the financial market. On the 20th, the global capital market analysis firm Kobeissiletter diagnosed through X that a structural change is occurring in the Japanese market, where long-term interest rates have been kept low for decades.

Several factors are acting in combination as the background of this rapid interest rate rise. Japan is facing a 'triple distress' of high inflation, potential changes in interest rate policies, and an overwhelming national debt ratio of 260% compared to Gross Domestic Product (GDP). Kobeissiletter analyzed that Japan's economy has entered a complex crisis phase.

Japanese Prime Minister Shigeru Ishiba surprised the market by mentioning, "The current situation is more serious than Greece." It is very unusual to mention Greece, which was at the center of the past Eurozone debt crisis, and evaluate Japan's financial situation as worse than that.

In the market, there is growing doubt about how long the Bank of Japan (BOJ) can maintain its ultra-low interest rate policy. BOJ has been continuing its interest rate suppression policy for years, but recently, gradual interest rate normalization signals have been detected. In addition, Japan holds about 1.1 trillion dollars worth of US treasury bonds, so it responds sensitively to changes in US interest rate policy.

Experts see that the Japanese government may combine various measures such as tax increases, fiscal austerity, and BOJ's monetary policy transition in the future. However, skepticism prevails that none of these measures have any short-term definitive effect.

The steep rise in Japan's long-term treasury bond interest rate could have a significant impact on global financial markets beyond its economy. Japan is one of the world's largest bondholders, and the rise in treasury yield is likely to cause a chain reaction in global asset prices and the overall investment flow.