Japanese government bonds suffered a sharp sell-off on May 18, 2026, with yields hitting multi-decade highs. The 30-year JGB yield reached approximately 4.2%, while the 10-year yield climbed to 2.8%, its highest since 1996. The pressure stemmed from fears of increased deficit-covering bond issuance following proposed fiscal measures, alongside rising global yields and oil prices. The turmoil also weakened the yen, with the dollar briefly rising above 159 yen in Tokyo trading.
Japan’s bond market faced intense pressure as long-term yields surged to record levels. The 30-year JGB yield reached about 4.2%, and the 10-year yield hit 2.8%.
Growing worries about inflation, public debt, and fiscal stability drove the sell-off. Investors also reacted to higher oil prices and potential new government borrowing.
Pressure increased after Prime Minister Sanae Takaichi announced plans for a supplementary budget. This raised expectations Japan may issue more deficit-covering bonds.
An official at a foreign securities firm in Japan stated that no investors were interested in purchasing bonds. The official also said long-term interest rates would likely keep rising.
The International Monetary Fund (IMF) recently assessed Japan’s gross public debt exceeds 200% of GDP. Investors are focused on new spending that might lead to greater deficits.
The sell-off followed pressure in other major bond markets, including U.S. Treasuries. The 10-year U.S. Treasury yield increased to 4.631%, a high since February 2025.
Oil prices added pressure, with Brent crude climbing to $111 per barrel. This followed a breakdown in talks to end the Iran war after a drone attack.
Markets now see over a 50% chance the Federal Reserve will raise rates by December. Before the war, investors had expected rate cuts this year.
The bond pressure spilled into currency markets, weakening the yen against the dollar. Eugene Leow, senior rates strategist at DBS, said the move is part of a broader regional repricing.
The sell-off further weakened eurozone bonds, like Germany’s 10-year yield. It touched a 15-year high of 3.193% for the second consecutive week.
