Japan's 10-year government bond yield has risen to its highest level in 30 years, as the market bets on the central bank raising interest rates as early as September.

Japan's government bond prices have fallen due to fiscal concerns and the market's growing speculation that the Bank of Japan may raise interest rates in the coming months, driving the 10-year bond yield to its highest level since 1996. The 10-year bond yield temporarily rose by 5.5 basis points to 2.93%. The 30-year bond yield increased by 5 basis points to 4.06%, nearing the record high reached in May. Insiders revealed last week that Prime Minister Fumio Kishida's government supports a rate hike by the Bank of Japan in the near future, with the next increase potentially occurring in September or October. Fiscal concerns are also putting pressure on the market, as the government has yet to clarify how it will fund the proposed two-year reduction in the food consumption tax. Overnight index swaps indicate an approximately 80% likelihood of an interest rate hike in September. Data released on Monday showed that Japan's economy unexpectedly slowed in the three months ending in June, a result that may complicate the Bank of Japan's communication challenges as it weighs the timing of its next rate hike.