The Finance Ministry on Tuesday raised its coupon rate on 10-year Japanese government bonds to 0.8%, a 10-year high, reflecting rising yields since the Bank of Japan's recent move to allow greater flexibility.

The coupon rate — the interest rate stated on bonds when issued — is double the previous 0.4% for issuance until September and marks the highest level since October 2013.

The coupon rate was last raised in January. By bringing it closer to market rates, the government can secure necessary funds via bond issuance more easily.

The BOJ loosened its grip in July, allowing the benchmark yield to rise toward 1.0%. It has maintained a yield curve control program to keep both short-term and long-term interest rates extremely low in an effort to achieve its 2% inflation target.

On Tuesday, 10-year yields climbed to 0.780% at one stage, a level unseen since September 2013.

Higher yields mean increased debt-servicing costs for Japan, which has a debt more than twice the size of its economy, and higher borrowing costs for consumers and businesses.

Finance Minister Shunichi Suzuki said higher interest rates would worsen the country's finances, limiting the government's discretionary spending.

"The government will closely monitor the effects of rising interest rates on people and businesses while compiling budgets by focusing on what is truly necessary for economic growth and people's livelihoods," Suzuki said during a press conference.

Japan's yields remain lower than those of the United States and other major economies, with the Federal Reserve among the most aggressive in raising interest rates to curb inflation.

BOJ Gov. Kazuo Ueda has dismissed the idea of an early shift from ultralow rates. Still, some policymakers at the central bank view the second half of the current business year ending March as crucial in determining whether stable inflation can be attained, backed by sustainable wage growth.