Japan’s borrowing costs have spiked to a 30‑year high as investors weigh the nation’s $2.3tn spending plan and a weak yen.

The 10‑year yield climbed to 2.85%, the strongest level since 1996, and the premium between 10‑year and 2‑year bonds widened to 1.4 percentage points from under 1% in April. The 30‑year yield now sits above 4%, approaching an intraday high of 4.2%. Japan’s sovereign debt exceeds 200% of GDP, raising alarms that future refinancing could become unsustainable.

The Bank of Japan’s first rate hike to 1% since 1995 was insufficient to calm markets; the central bank will stop cutting its monthly bond purchases this year and will hold them at about ¥2tn ($12.5bn) a month. Analysts warn that if the 10‑year yield climbs above 3%, fiscal dominance could trigger a vicious cycle of higher interest payments.

For investors, the surge signals that Japan’s fiscal trajectory and BoJ policy will increasingly influence global bond spreads. A persistent rise in yields could spill over into other markets, especially those with long‑term debt, underscoring the need to monitor Japanese monetary and fiscal developments closely.