China’s Key Bond Yield Set to Drop Below Japan’s for First Time

China’s benchmark bond yield is poised to fall below Japan’s, a historic crossover that may reignite fears the world’s No. 2 economy is sliding into the deflationary spiral that paralyzed its neighbor in the 1990s.

The yield on China’s 10-year bond is hovering near the lowest in more than two months as underwhelming economic data and losses in the stock market prompt investors to seek the safety of sovereign debt. On the other hand, Japanese yields of a similar tenor have surged to the highest since 2008 on concern that the government’s spending plans will fuel inflation and add to the country’s already-heavy debt burden.