Japanese bankers association head warns of economic hit

The chairman of the Japanese Bankers Association, Masahiko Kato, warned that additional hikes in long-term interest rates might harm the economy as the 10-year bond yield reached a new decade high.

“The recent hike in long-term interest rates was unlikely to have a significant influence on Japan’s economy,” Kato said during a regular press conference.

“If long-term interest rates rise further, there’s a potential that economic activity might suffer downward pressure from higher borrowing costs and a likely currency bounce that undermines exporters’ earnings,” he added.

On Thursday, Japanese government bond yields reached fresh decade highs, matching rises in US Treasury yields on expectations that the Federal Reserve will hold interest rates higher for longer.

The 10-year Japanese government bond (JGB) yield increased 2.5 basis points to 0.830%, its highest since July 2013 and approaching the Bank of Japan’s 1.0% hard ceiling imposed in July.

The recent rise in the 10-year yield has increased market anticipation that the BOJ may raise the limit again as soon as its next policy-making meeting on October 30-31.