Japan's benchmark 10-year government bond yield closed at 3.04% on Tuesday, its highest closing level since 1996 and double its level a year earlier, as reports of a potential increase in defense spending sharpened concern about fiscal sustainability. Bloomberg reported that Japanese defense officials had indicated a willingness in discussions with U.S. officials to consider raising defense spending to 3.5% of gross domestic product within a decade, although a 3% target also remained under consideration. The Ministry of Defense denied that Japan had communicated any intention to adopt a 3.5% target. A 3.5% allocation would equal roughly ¥24 trillion using the Cabinet Office's nominal GDP projection, compared with current defense-related spending of ¥10.6 trillion. The yen fell to 155.24 per dollar, while IHI Corp and Kawasaki Heavy Industries ended higher.