[Economy] Coupon rate for 10-year government bonds raised to '3.1% per annum'—reaching the highest level in about 30 years and 2 months since 1996

On October 6, 2026, the Ministry of Finance announced that it has set the coupon rate for 10-year government bonds to be issued this month at 3.1% per annum. This is a further increase from the 2.7% of the previous month (September issuance), marking the highest level in approximately 30 years and 2 months since the auction in August 1996. We will clearly summarize the background market trends and the factors behind the interest rate hike.

1. Background of the coupon rate hike and market trends

This significant increase directly reflects the recent domestic and international economic environment and the upward trend in interest rates.

• Upward trend in long-term interest rates: The yield on newly issued 10-year government bonds, which serves as an indicator for long-term interest rates, rose to approximately 3.115% in late September, the highest level in about 30 years. In response, the coupon rate, which is reviewed in principle once every three months, has also been raised.

• Main factors for the rise:

  • Surging resource and energy prices due to the tightening situation in the Middle East, and the resulting persistent inflation concerns.

  • Market caution regarding the Takachi administration’s aggressive fiscal expansion policy and expectations of further interest rate hikes.

2. Impact on the real economy and financial environment

With 10-year government bond interest rates reaching their highest level in about 30 years, changes are occurring in our surrounding financial environment and the attractiveness of government bonds.

• Increased yield attractiveness of government bonds: With the coupon rate reaching 3.1% per annum, the yield attractiveness of yen-denominated fixed-income assets, including government bonds, has increased significantly.

• Borrowing costs and market ripple effects: On the other hand, the rise in long-term interest rates also leads to upward pressure on borrowing rates for mortgages and corporate financing. Including the impact on fiscal management and the market as a whole, the situation remains one where we cannot take our eyes off future interest rate trends.

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