The Japanese government raised Tuesday the coupon rate for new 10-year government bonds to above 1 percent for the first time in some 12 years, reflecting recent rises in long-term interest rates stemming from the Bank of Japan's tweaks to monetary policy.
The Finance Ministry hiked the coupon rate -- the annual rate of interest paid to investors -- for the benchmark bonds to be issued Wednesday from 0.8 percent to 1.1 percent.
The last time the rate was set above 1.0 percent was in April 2012, a year before the central bank embarked on its unorthodox monetary easing program designed to lift Japan out of a period of chronic deflation.
The BOJ led by Governor Kazuo Ueda, who took office in April 2023, has been moving to normalize monetary policies overseen by his predecessor Haruhiko Kuroda.
In March, it scrapped the negative interest rate policy and yield cap program aimed at keeping long-term rates low, returning to the tradition of using short-term interest rates to guide monetary policy.
Since the policy tweaks, yields on the benchmark 10-year Japanese government bond have been rising.
Although higher coupon rates on the key 10-year index are likely to benefit investors that trade government bonds, it heightens debt-servicing costs for heavily indebted Japan, straining the country's finances.
It also fuels concerns about higher borrowing costs and housing loans as interest rates rise.
