Japan’s 40-year government bond yield hit a record high on Tuesday amid a broad selloff in government bonds, as investors worried that proposed cuts to the food sales tax could worsen the country’s fiscal position.
The long-dated yield rose more than five basis points to 4%, the highest level since the 40-year maturity was introduced.
Yields on shorter maturities climbed sharply as well. The 10-year Japan government bond yield rose by over six basis points to 2.3%, the highest level since 1999, while yields on the 20-year tenor jumped by around 9 basis points to 3.35%.
The selloff came a day after Prime Minister Sanae Takaichi said she plans to dissolve parliament on Friday and call a snap election on Feb. 8, setting the stage for a campaign that is expected to focus heavily on economic policy.
“Ultra‑long JGB yields are being pushed higher not only by the structural supply–demand imbalance but also by a fresh re-pricing of term and risk premium as markets absorb a more expansionary fiscal stance and persistent inflation,” said Masahiko Loo, senior fixed income strategist at State Street Investment Management.
