Japan’s 30-year Japanese Government Bond (JGB) yield reached a new all-time high (ATH) during trading, hitting an intraday peak of approximately 3.527% before closing around 3.50–3.51%.
The day’s high at 3.527%, with Trading Economics noting the historical all-time high as 3.53% in January 2026 likely referring to this session’s peak. Reuters reported earlier in the session that the 30-year yield touched a record 3.515% amid selling pressure ahead of an upcoming auction.
This surpasses previous records from 2025 around 3.2–3.4% in mid-to-late 2025. The surge reflects ongoing concerns over Japan’s fiscal outlook, including record-high budget spending under Prime Minister Sanae Takaichi, rising debt-servicing costs, and the Bank of Japan’s continued policy normalization, rate hikes and quantitative tightening.
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Longer-dated bonds have been particularly volatile, with super-long yields— 20-, 30-, 40-year repeatedly hitting records in recent months due to reduced BoJ dominance in the market and inflation persistence. This marks a dramatic shift from the ultra-low yield era, highlighting increased borrowing costs for the world’s most indebted developed nation.
What is BoJ Policy Normalization?
The Bank of Japan (BoJ) policy normalization refers to the gradual unwinding of its ultra-accommodative monetary policies implemented over the past two decades to combat deflation and stimulate economic growth. These included negative interest rates, massive quantitative easing (QE), and yield curve control (YCC).
Normalization aims to return to a more standard monetary framework, with positive interest rates and reduced central bank intervention in bond markets, while ensuring sustainable 2% inflation supported by a “virtuous cycle” of wage growth and price increases.
The process is deliberate and cautious, reflecting Japan’s history of prolonged deflation and high public debt over 200% of GDP. The BoJ emphasizes data-dependent decisions, monitoring wage negotiations (shunto), inflation trends, and global risks.
Key Milestones in Normalization
March 2024: Ended the world’s last negative interest rate policy NIRP, in place since 2016 by raising the short-term policy rate to 0–0.1%. Also abolished Yield Curve Control YCC, introduced in 2016 to cap 10-year JGB yields around 0% and stopped new purchases of ETFs and REITs.
Subsequent 2024–2025 hikes: Gradual increases, reaching 0.5% by mid-2025. December 2025: Raised the policy rate by 25 basis points to 0.75%, the highest level in 30 years since 1995. This reflected confidence in sustained wage growth and inflation near 2%. Ongoing Components as of January 2026.
Current policy rate: 0.75%. Real interest rates remain deeply negative inflation has exceeded 2% for nearly four years. BoJ Governor Kazuo Ueda has signaled further hikes if economic and price trends align with forecasts, particularly if core inflation stays above 2% and wage growth persists expected >3–5% in 2026 shunto negotiations.
Monthly JGB purchases reduced progressively e.g., to ~3 trillion yen by early 2026, further cuts planned. Slower pace than peers like the Fed or ECB to avoid sharp yield spikes. Analysts forecast 1–2 additional 25bp hikes in 2026, potentially reaching 1.0–1.25% by year-end or mid-2027.
Terminal (neutral) rate estimates: 1–1.5% some up to 1.75–2.5%. Next hike likely in the second half of 2026 e.g., July–October, after assessing spring wage outcomes and core inflation. The January 22–23, 2026, meeting will update quarterly forecasts.
Strong wage-price cycle, persistent inflation, core projected ~1.8–2.0% in FY2026–2027, and reduced external uncertainties. Fiscal expansion under Prime Minister Sanae Takaichi (“Sanaenomics”), yen weakness, global slowdowns, or U.S. trade policies could influence pace.
The BoJ prioritizes avoiding abrupt tightening to prevent economic disruption. This shift has contributed to rising JGB yields e.g., 30-year at record highs in January 2026, reflecting market expectations of higher borrowing costs for Japan’s indebted government.
Overall, normalization marks Japan’s transition from deflation-fighting to managing moderate inflation in a growing economy.