Japan sovereign yield curve
JGB (JPY) — full term structure, 2s10s and 3m10y spreads, NY Fed recession probability, Nelson-Siegel-Svensson fit.
Data as of June 30, 2026Term structure
| Tenor | 3M | 6M | 1Y | 2Y | 3Y | 5Y | 7Y | 10Y | 20Y | 30Y |
|---|---|---|---|---|---|---|---|---|---|---|
| Yield (%) | 0.91 | 0.98 | 1.12 | 1.39 | 1.54 | 1.92 | 2.22 | 2.66 | 3.55 | 3.86 |
Term structure with NSS fit
Observed yields (markers) overlaid with the Nelson-Siegel-Svensson smoothed fit (orange).
Dashed line = current policy rate (0.50%).2s10s spread (5-year history)
Shaded red zones = inverted curve (2s10s < 0). Inversion has historically preceded recession with 6-24 month lead time.Recession probability — 12 months ahead
Estrella-Mishkin probit (NY Fed): P(recession) = Φ(-0.5333 - 0.6629 × spread3m10y).
Nelson-Siegel-Svensson parameters
Fit residual RMSE: 0.050 pp. See the NSS methodology page for the parametric form.
| β₀ | β₁ | β₂ | β₃ | λ₁ | λ₂ |
|---|---|---|---|---|---|
| 5.056 | -4.154 | -2.329 | -4.921 | 1.50 | 5.00 |
How to read this country's curve
Look first at the 10-year yield in the headline tiles above — that is the benchmark long-term borrowing cost for this country. Then compare it to the policy rate set by the central bank. If the 10-year is meaningfully above the policy rate, investors expect rates to stay supportive of growth; if it sits below, the market is pricing rate cuts ahead.
Next, check the 2s10s and 3m10y spread tiles. Green numbers mean the curve is sloping up in the normal way (longer bonds yield more). Red numbers mean the curve is inverted — long bonds yield less than short bonds, which historically precedes a slowdown. The deeper the inversion, the stronger the warning signal, although the lag between inversion and recession typically runs 12-24 months.
Finally, the recession probability at the top combines the 3m10y spread with the NY Fed's statistical model. A reading above 30% is the conventional caution threshold; above 50% historically meant a recession was the base case within a year. For non-US countries this is a useful comparative signal but the exact level should be read with care.
Interpreting the NSS parameters for this country
The four estimated betas decompose the curve into orthogonal factors. β₀ is the long-run level — the asymptotic yield as maturity goes to infinity, interpretable as the market's terminal nominal anchor (steady-state real rate plus expected inflation). β₁ is the slope factor; a negative β₁ produces an upward-sloping curve while a positive β₁ flattens or inverts the front end. β₂ and β₃ govern two curvature humps controlled respectively by λ₁ and λ₂ years — the maturities at which each curvature factor peaks. Diebold-Li (2006) show β₀+β₁ converges to the instantaneous short rate and β₀ to the consol yield, providing direct factor-model intuition.
On the recession probability: the reading uses the Estrella-Mishkin (1998) coefficients calibrated on US post-war NBER data. For developed-market peers (Eurozone, UK, Canada, Australia, Switzerland) the cross-country mapping is broadly defensible, but the absolute level is indicative, not literal — local probit re-estimation (Moneta 2005 for the euro area; Chinn-Kucko 2015 for OECD comparators) typically yields slightly weaker, but still significant, predictive coefficients. The reading is best treated as a relative-rank signal across our nine-country set rather than an unconditional probability.
A final caveat: the spread input embeds both an expected-policy component and a term-premium component. When the ACM term premium is compressed by structural demand for duration (LDI flows, central-bank balance-sheet residuals, foreign reserve recycling), an inverted curve can flag elevated probability without indicating that aggressive easing is priced. Cross-checking the model against survey-based policy expectations and against the country's own forward OIS curve disciplines the signal.
What the JGB curve is signalling
The Japanese Government Bond curve is the single most important post-YCC story in global fixed income. With the Bank of Japan’s short-term policy rate at 0.50%, the JGB curve has steepened dramatically since the formal exit from yield curve control in 2024. Current points: 3-month bill near 0.42%, 2-year at 0.78%, 10-year JGB at 1.62%, 30-year at 2.32%. The curve is positively sloped at every segment and exhibits the highest 2s10s spread in our universe at over 80 basis points.
Inversion status and term spreads
The JGB curve is comfortably positive at 2s10s and 3m10y, putting the Estrella-Mishkin recession probability for Japan at near-zero levels. This is somewhat misleading — the probit model was calibrated on US data, and Japan’s chronic low inflation and structurally low yields mean the probit intercept is unlikely to map cleanly to Japanese recession risk. Nevertheless, the curve shape itself is unambiguously expansionary.
What the curve says about BoJ expectations vs market pricing
The JGB curve embeds these views:
- Markets price roughly 25 bp of further BoJ hikes over the next 12-18 months as policy normalises further.
- The 10-year at 1.62% implies an average expected short rate of around 1.0-1.2% over the next decade — substantially above the post-2013 era when 10-year JGBs traded near zero, but still well below other developed sovereigns.
- The 30-year at 2.32% reflects long-end demand pressure: Japanese life insurers and pension funds remain natural buyers of duration despite the broader steepening.
Nelson-Siegel-Svensson fit
Japan’s NSS fit is interesting because the JGB curve has historically been the hardest in the world to model parametrically — first because of zero/negative rates that broke many term-structure conventions, and then because YCC artificially anchored the 10-year point. Post-YCC, NSS now fits cleanly: the level factor (beta0) sits around 2.5%, the slope factor is strongly negative (reflecting the very low front end), and the curvature factors capture the smooth steepening through the belly. See the NSS methodology page.
Cross-references
- Bank of Japan overview — policy rate, JGB purchase plans, meeting schedule.
- Real interest rate tracker — Japan real rate vs. global.
- Recession probability dashboard — Japan in cross-country context (interpret with caution given probit calibration).
- Nelson-Siegel-Svensson methodology.