TOKYO (Reuters) - Japan's banking lobby head Masahiko Kato warned on Thursday further rises in long-term interest rates could hurt the economy as he spoke in the wake of an increase in the 10-year bond yield to a new decade high.
In a regular news conference, Kato said the recent rise in long-term interest rates was unlikely to have a big impact on Japan's economy.
But if long-term rates see further sharp increases, "there's a chance economic activity could face downward pressure from rising interest payment for borrowing and a possible yen rebound that hurts exporters profits," said Kato, who is head of the Japanese Bankers Association.
Japanese government bond yields rose to new decade highs on Thursday, tracking gains in U.S. Treasury yields amid expectations the Federal Reserve will keep interest rates higher for longer.
The 10-year Japanese government bond (JGB) yield rose 2.5 basis points to 0.830%, its highest since July 2013 and approaching the 1.0% hard cap set by the Bank of Japan in July.
The recent rise in the 10-year yield has heightened market expectations the BOJ could raise the cap again as early as its next policy-setting meeting on Oct. 30-31.