The yield on Japan's 10-year government bond hit 3% for the first time since September 1996, signaling the end of three decades of cheap money that sustained global markets through the carry trade mechanism, where investors borrowed yen almost free of charge in Tokyo to invest in higher-yielding assets in other markets. The Bank of Japan is expected to raise rates to 1.25% at the September meeting, with an 80% probability assigned by the market. The yield rise occurs in a context of fiscal fragility, with about one in four yen of the 2026 budget destined for public debt service, equivalent to 204% of GDP. Paradoxically, the yen remains weak, hovering around 160 per dollar, despite joint currency intervention with the United States in July. Japanese investors are selling US bonds at historic volumes, which could pressure yields in developed markets.
Jornal Económico02/09/26, 13:49
