Japanese, Indian Bond Yields Rise Amid Global Rate Hike Concerns

Japan's 10-year government bond yield has surged to a 17-year high, reaching around 1.6%, driven by diminished expectations for an early Federal Reserve rate cut and growing anticipation of Bank of Japan (BOJ) interest rate hikes amid persistent inflation and fiscal concerns. This rise in Japanese yields follows a broader global trend of increasing long-term borrowing costs, impacting investor appetite for riskier assets and reshaping financial markets. The BOJ has raised its inflation outlook and hinted at possible tightening by year-end, despite cautious statements from Governor Kazuo Ueda about inflation not yet firmly hitting the 2% target. Similarly, Indian 10-year bond yields climbed above 6.5% as markets reacted to the government’s proposed Goods and Services Tax (GST) reforms, which may cause near-term fiscal revenue impacts but aim to boost consumption long term. In the UK, inflation remains a significant concern for small and medium-sized businesses, with consumer price inflation rising to 3.8% in July, complicating the Bank of England’s prospects for further interest rate cuts and prompting calls for supportive fiscal measures in the upcoming Autumn Budget. Together, these developments underscore persistent global inflationary pressures and cautious central bank approaches that are keeping borrowing costs elevated worldwide.