China's Bond Yields Fall Below Japan's Across All Maturities
Claire Weston
Chinese government bond yields have fallen below Japan's at the 30-year, 10-year, 2-year, and 1-year tenors — only the 3-month bill remains uninverted, by roughly 15 basis points — laying bare a fundamental divergence in the two economies.
What does "below Japan across the board" actually mean?
Starting in November 2024, Chinese yields broke below Japan's tenor by tenor: first the 30-year, then the 10-year, then the 2-year in March 2025.
Last week the 12-month Treasury bill yield briefly dipped below Japan's — extending the pattern to virtually every major maturity.
This means → this is not a one-off at a single tenor but a systematic downward shift of the entire yield curve, with the trend now propagating from the long end to the short end.
How far away is the last remaining gap?
Only the 3-month bill has yet to invert; the spread between the two countries sits at roughly 15 basis points.
In plain terms = 15 basis points is 0.15 percentage points — a narrow gap that, on current trajectory, looks set to close.
FT Alphaville notes that the convergence at the short end is an extension of an established trend, not an isolated event.
Why is China's rate falling while Japan's is rising?
Japan is gradually exiting deflation; the Bank of Japan is expected to raise its benchmark rate to 1% this month — the highest since 1995 in the Japanese context.
China, meanwhile, faces sluggish growth; multiple headwinds are pushing bond yields lower.
This reflects a fundamental divergence in economic cycles: Japan is hiking to catch up with inflation, China is keeping rates low to support growth — the two paths are moving in opposite directions.
Beyond a weak economy, what else is pushing Chinese yields down?
Some investors treat Chinese government bonds as a safe asset and a portfolio diversification tool, actively buying them for allocation purposes.
This means → the decline in yields is not purely a passive reflection of economic weakness — there is also an active bid from capital seeking a haven.
FT Alphaville argues the China-Japan yield inversion is unlikely to reverse in the near term.
Content is for reference only, not financial advice.