Japan 10-Year Bond Yield Hits 3% for First Time Since 1996 as BOJ Rate Hike Bets Mount

Japan's 10-year government bond yield crossed the 3% threshold on Tuesday for the first time since 1996, marking a historic turning point for a debt market that spent decades pinned near zero under the Bank of Japan's ultra-loose policy. The move adds to a broader rise across the Japanese yield curve, with the 40-year bond yield climbing 6.5 basis points to 4.265% on the same day.

The milestone comes as expectations solidify that the BOJ will raise interest rates this month, a bet reinforced by U.S. Treasury Secretary Scott Bessent, who met BOJ Governor Ueda on Sunday and publicly signaled he expects the central bank to hike rates soon. A U.S. Treasury official confirmed the meeting to Japanese broadcaster NHK, and analysts note the BOJ's own hawkish communications in recent weeks point to a near-term move.

Fueling the global bond selloff alongside Japan's domestic dynamics, renewed Middle East tensions pushed crude oil prices higher, stoking inflation fears and raising the prospect of tighter monetary policy across major economies. Asian and U.S. government bond yields both rose on the day, reflecting the shared pressure from higher energy prices. The yen steadied near 160 per dollar as markets weighed the rate-hike outlook.