Japan’s 10‑year bond yield rose to 2.93%, the highest since 1996, and is nearing the watched 3% threshold as a weak yen and high oil prices raise inflation concerns. The move reflects expectations that the Bank of Japan will lift rates next month.

Analysts note that reaching 3% would be a “critical defence line for fiscal credibility,” according to Shoki Omori of Deutsche Bank, while Junichi Makino of SMBC Nikko warns the yield could fall back to the 2% range if inflation expectations ease.

The yen has slipped again after coordinated interventions, trading around ¥159 to the dollar, and Japan’s Q2 real GDP grew just 1.1% versus the 2% forecast, signalling weaker domestic demand.

Investors still anticipate a rate hike to 1.25% in September, and shares were largely flat, though AI stocks like Kioxia saw a sharp rise.