FX.co ★ Japanese Yields Climb on Debt Concerns

Japan's 10-year government bond yield surged to approximately 2.18% on Wednesday, marking its highest point since 1999. Concurrently, the 5-year bond yield also reached unprecedented levels, as concerns regarding the nation's fiscal sustainability intensified. This development preceded the Ministry of Finance's upcoming auction of about 2.5 trillion yen in 5-year securities, heightening anxiety over debt-financed expenditures. The rising yields on Japanese Government Bonds (JGBs) are also attributed to speculation that Prime Minister Sanae Takaichi might announce a snap election next month. Such a move could strengthen her position and facilitate the implementation of expansionary fiscal strategies, with reports indicating that lower house elections might occur on February 8. Additionally, a private survey revealed a downturn in manufacturing activities due to trade disputes, while the service sector contends with tourism-related hurdles, thereby constraining the Bank of Japan's capacity to implement further interest rate increases.