TOKYO: The interest rate that Japan pays on its government-issued bonds fell to its lowest level since 2003 on Friday, as public borrowing costs surged in Europe on worries over its fiscal woes.
The yield on the 10-year Japan Government Bond (JGB) hit 0.815 percent with investors seeking a safe haven amid worries about debt-hit Greece exiting the eurozone and sending shockwaves across the 17-nation bloc.
Weak US economic data also helped push investors to Japanese bonds, dealers said, with rates also falling on Tokyo's five-year paper.
The decline means that Japan, rated Aa3 by Moody's, is paying less to borrow money on debt markets, suggesting that its government paper is seen as a secure asset with little risk of Tokyo defaulting on its obligations.
Japan has an eye-watering national debt that amounts to more than twice its gross domestic product, putting it at the top of industrialised nations, a problem that would usually mean it would have to pay more to borrow funds.
But its bonds are mostly held by domestic, long-term investors, making them less vulnerable to wild fluctuations or howls of criticism from foreign buyers over the nation's fiscal management -- a fate that has befallen Greece.
Even Europe's top economy, triple A-rated Germany, was paying more interest on its 10-year bond than Japan at 1.399 percent.
By contrast, debt-riddled Spain has seen a surge in the yield, or interest rate, on its 10-bonds with Madrid paying about 6.29 percent while Italy is sitting at 5.81 percent.
Japan's Prime Minister Yoshihiko Noda is trying to double the nation's consumption tax to stem a surging national debt, as the costs of a rapidly ageing population heap pressure on public coffers.
Dow Jones Newswires contributed to this report
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