Japan's 10-Year Bond Yield Hits 3% for First Time Since 1996, Threatening the Global Yen Carry Trade

Japan's 10-year government bond (JGB) yield has touched 3% for the first time since 1996, officially bringing an end to decades of near-zero borrowing costs.
The structural shift undermines the foundations of the global yen carry trade, where investors historically borrowed cheap yen to fund purchases of higher-yielding US equities and Treasuries. With domestic yields now offering a competitive return, the yield spread has compressed, incentivizing Japanese capital to repatriate.
Market participants are closely tracking JGB yield trajectory as a critical macro risk factor, recalling how disruptions to the carry trade—such as the August 2024 volatility spike—rapidly transmit shocks across US and global equity markets.