Long-term interest rates have reached the 3% mark for the first time in about 30 years, reviving their function as an 'economic thermometer.' The yield on new 10-year government bonds is the representative indicator for long-term rates. In the early 1990s, they stood at 7-8%, but continued to decline due to economic stagnation and deflation after the bubble burst, and at one point recorded minus 0.3% under the Bank of Japan's massive monetary easing and negative interest rate policy. However, with inflationary pressures after the COVID-19 pandemic and the BOJ's rate hikes, the trend turned upward. The fiscal expansion policies of the Takahashi administration, which took office in October 2025, raised concerns about increased government bond issuance, accelerating bond selling. The market is strengthening its warning to the Takahashi administration, keeping in mind the UK's 'Truss shock' in 2022, when unfunded tax cuts led to a bond market crash.
Long-term yields hit 3% for first time in 30 years due to BOJ hikes and fiscal expansion concerns, indicating rising rates.
