TOKYO — Yields on 30-year Japanese government bonds climbed to their highest level since the maturity was first sold in 1999. The 10-year Japanese government bond yield stood at 2.77%, while the yen traded at approximately 160 per U.S. dollar.

On Tuesday, the 30-year U.S. Treasury yield reached 5.18%, the highest since 2007. In recent years, investors regarded a 5% yield on the 30-year U.S. Treasury as a benchmark level. Gilt yields have reached the highest level among the Group of Seven nations.

In recent weeks, Prime Minister Sanae Takaichi directed Finance Minister Satsuki Katayama to prepare an extra budget financed with fresh borrowing, citing rising commodity prices and falling consumer confidence. In the months before her premiership, Takaichi had proposed tax cuts and increased stimulus spending.

Japan's debt-to-GDP ratio is 260%, and the country has the fastest-shrinking population in the developed world. Ninety percent of Japanese government bonds are held by domestic investors. The Bank of Japan maintained interest rates at or near zero for 27 years, and fears of triggering a bond market meltdown have long dissuaded Japanese policymakers from hiking interest rates.

Ultralong Japanese government bonds were created at the request of life insurers and similar institutional investors to match maturities between their assets and liabilities. In 2025, trades in 10-year Japanese government bonds totaled ¥1.0 quadrillion.

Deborah Tan, an analyst at Moody's Ratings, pointed to external and domestic pressures weighing on the market. "The Middle East conflict has prompted a revision of our growth and inflation forecasts for Japan," she said. Tan added: "Higher inflation and prospects of additional fiscal support are putting pressure on JGB yields."

Richard Katz, author of the Japan Economy Watch newsletter, cautioned against reading too much into the moves at the long end of the curve. "Such thin trading means the yield on 30- and 40-year JGBs can be tossed around by a relatively small burst of buying or selling," he said. "It is a mistake to take such gyrations as a sign of financial fundamentals," Katz said.

Robin Brooks, economist at the Brookings Institution, placed the Japanese moves in a broader context. "Japan has been in a slow-motion blow-up of exactly this kind for two years," he said. Brooks said: "The bottom line is that 'Liz Truss' bond market selloffs are becoming more common across the G10 as debt levels rise and institutional integrity declines. The distinction between the G10 and emerging markets is becoming blurred, which is one driver behind the rapid pace of appreciation of EM currencies against the G10."