Japan’s 10-year government bond yield hovered around 2.2% on Monday as investors digested data showing that economic growth in the fourth quarter of 2025 was significantly weaker than expected. The economy expanded just 0.1% quarter on quarter in Q4, rebounding from a 0.7% contraction in Q3 but missing forecasts for a 0.4% increase.
Consumer spending, the largest component of GDP, rose only 0.1%, underscoring subdued domestic demand as households continued to struggle with elevated inflation.
Prime Minister Sanae Takaichi recently reaffirmed her commitment to supporting growth through proactive fiscal measures following her landslide victory in the Feb. 8 Lower House election. She reiterated plans to cut the 8% sales tax on food for two years and pledged that Japan’s finance ministry will not issue new government bonds to cover the resulting revenue shortfall. Instead, her administration intends to finance the measures through a mix of subsidies, special tax provisions, and non-tax revenues in what she described as a “sustainable” manner.
