By James Saft
(Reuters) – Spiking interest rates in Japan threaten to undermine, and possibly end, the recovery being engendered by Abenomics.
That could reverse gains not only in Tokyo stocks, but in stock markets world-wide which have benefited from Japanese liquidity.
While a rebound in activity has allowed the Bank of Japan to upgrade its assessment of conditions for a fifth straight month, bond yields have risen sharply in extremely volatile conditions.
Yields on 10-year Japanese government bonds have risen to 0.88 percent, nearly triple their April 5 low of 0.315 percent, just after the BOJ introduced its latest easing campaign, part of Prime Minister Shinzo Abe’s overall policy of Abenomics, including stimulative monetary and fiscal policy and economic reforms.
“I don’t think the recent rise in yields is having a big impact on the economy,” Bank of Japan governor Haruhiko Kuroda said on Wednesday after a two-day BOJ policy meeting.