The Japanese Government Bond Market: A Global Inflection Point

Japan’s government bond (JGB) market is emerging as a key driver of global financial trends. Since early 2024, the Bank of Japan (BOJ) has taken a historic turn—abandoning negative interest rates, phasing out yield curve control (YCC), and scaling back bond purchases. These shifts have triggered a sharp rise in long-term JGB yields.

On July 16, 2025, the 10-year JGB yield hit 1.597%—its highest since 2009—while 20- and 30-year yields climbed to 2.648% and 3.211%, respectively. The 10-year yield has nearly tripled in just 18 months, up from 0.552% in early 2024.

Why does this matter globally? As Société Générale strategist Albert Edwards explains:

“Super-loose BOJ policies, both ZIRP and outsized QE, had long helped anchor Western bond yields far below where they would have been otherwise, as various forms of the yen carry trade suppressed Western yields.”

This longstanding dynamic has resulted in a strong correlation (0.74 since 2006) between JGBs and U.S. Treasuries. Now, even though the BOJ has only paused its ultra-easy policies temporarily, JGB yields continue to rise. This upward trend could ultimately exert pressure on U.S. and global interest rates—even as other central banks begin shifting toward easing.

The risk? A tightening of global liquidity and renewed market volatility. With U.S. stocks hovering near record highs, investors should keep a close watch on Japan’s bond market as a potential trigger for broader turbulence. That said, gold may stand to benefit from such instability, as it has historically moved in tandem with long-term JGB yields over an extended period.