Japan will be able to cope with higher bond yields

While the yield on 30-year Japanese Government Bonds hit a fresh multi-year high this week, this doesn’t pose a near-term threat to the sustainability of Japan’s public finances. After all, shorter-dated yields have risen much less and higher borrowing costs will take many years to filter through. And whereas the analyst consensus is that the budget deficit has widened in recent years, our estimates suggest that Japan will record the first primary surplus since the early-1990s next year.