Japan’s benchmark 10-year government bond yield reached 3 per cent on Tuesday for the first time since 1996, following US Treasury Secretary Scott Bessent’s push for the Bank of Japan to raise interest rates more aggressively. The move reflects a global bond sell-off, with US 10-year Treasury yields also hitting multi-year highs amid renewed Middle East conflict. Bessent met Japanese Finance Minister Satsuki Katayama and BoJ Governor Kazuo Ueda at a G20 meeting in the US, urging Tokyo to act.

Market expectations now price in a 0.25-point rate hike to 1.25 per cent at the BoJ’s September 18 meeting. The 3% threshold raises concerns about Japan’s fiscal sustainability and could prompt life insurers to repatriate capital from US bonds. Japan’s budget assumes a 3.8 per cent rate for the fiscal year starting next March.

The yen, which had strengthened to ¥155 per dollar after joint US-Japan interventions in July and August, has since weakened back toward ¥160. Authorities stress continued coordination is needed, as disorderly yen movements risk global market instability and higher borrowing costs for US households.