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(Bloomberg) — Japan’s government bond yields marched higher across the curve on Friday as elevated oil prices fuel inflation concerns across global debt markets.
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The rate on the nation’s 20-year note rose 6.5 basis points to 3.61%, its peak since 1996. Yields on 30- and 40-year debt are nearing their highest levels since their debuts.
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The war-driven surge in energy prices has stoked inflation, driving government borrowing costs higher globally. In Japan, the rise in yields also reflects renewed concerns over the nation’s fiscal policy after reports that the government is considering a supplementary budget.
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READ: Treasuries Lead Global Bond Yields Higher on Inflation Angst
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Japanese Finance Minister Satsuki Katayama reiterated on Friday that the government doesn’t need to compile an extra budget for now, adding that a recent rise in yields on Japanese government bonds is part of a broader global trend.
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The slide in the yen is adding to inflation risks and weighing on sovereign debt as pressure mounts for the Bank of Japan to raise rates after holding policy steady last month. Data on Friday also showed Japan’s corporate goods prices surged in April by the most in 12 years, in another sign of how the war in Iran is boosting inflationary pressures.
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“Inflationary pressures are rising globally and with rates so low in Japan, the BOJ will have to hike to help reverse JPY slide as it is being used as a funding currency, which puts pressure on JPY and thus inflationary pressures, on top of supply shock pressures,” said Trinh Nguyen, a senior economist at Natixis.
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—With assistance from Umesh Desai.
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English (US)