‘Major global stress point’: Sanjeev Sanyal warns as Japan’s 30 year yield hits record high

Japan’s long-term borrowing costs have risen to historic levels, exacerbating concerns about the country’s financial stability, a weak currency and growing pressures in the global bond market.

Sharing a chart of Japan’s 30-year yield on “Japan’s 30-year yield is at 3.4% – this is a major global pressure point,” he wrote. “Given its debt levels, Japan will either have to accept recession or a prolonged period of high inflation. Meanwhile, the UK’s 30-year yield is 5.4%.”

Yields are rising to multi-decade highs

Japanese government bonds (JGBs) continued to sell off, pushing 30-year yields to a record high of 3.37%, up 3 basis points – the highest level ever recorded. Other maturities followed the same pressure:

• 20 year return: The index jumped 3.5 basis points to 2.85%, the highest level since June 1999
• 10 year return: The interest rate rose by 3.5 basis points to 1.8%, the level last seen in June 2008.

This sharp move reflects a combination of risks: Japan’s massive debt, persistent inflationary pressures, and a rapid weakening of the yen.

Stimulus package fuels debt concerns

The rise in yields comes just days after Prime Minister Sanae Takaishi’s government approved a 21.3 trillion yen ($135 billion) stimulus package aimed at helping households and businesses adapt to rising prices. The package includes energy subsidies and tax cuts.

Takaishi, Japan’s fifth prime minister in five years, came to power last month pledging to tackle inflation, the main factor behind the political downfall of his predecessor, Shigeru Ishiba.

But while the stimulus may provide relief in the short term, markets fear it will worsen Japan’s debt burden – already the highest among advanced economies – exacerbating the sell-off in government bonds and weakening the yen further.

The yen is under pressure

A lower yen leads to higher import costs for Japan, which relies heavily on foreign food, fuel and raw materials.

Finance Minister Satsuki Katayama strongly hinted at the possibility of intervention, saying that the government “will take appropriate action against disorderly movements in the currency market.” Such statements usually pave the way for intervention in the currency market.

UK revenues also reached their highest levels in several decades

The unrest in Japan comes as long-term borrowing costs rise sharply in major economies.

UK 30-year bond yields recently reached 5.680%, a 27-year high, driven by concerns about:

• UK inflation stubbornly high
• High government borrowing
• Slowing economic growth
• A state of political uncertainty resulting from the pressure exerted by US president Donald Trump on the Federal Reserve Bank

The UK now has the highest long-term borrowing costs in the G7, a fact highlighted by Sanyal as part of his broader warning about global bond pressures.

The spike in yields in Japan is particularly important because the country has long been a haven for the world’s ultra-low interest rates. Rising Japanese government bond yields could spread across global markets, raising financing costs and amplifying volatility.

Sanyal’s assessment highlights the scale of the moment: The world may be entering a phase in which the most indebted countries face a painful choice – prolonged recession or inflation – as borrowing costs rise relentlessly.