Japan’s long-term government bond yield reached a record-high 4.235%, narrowing the policy latitude of the BOJ and the government. The Takaichi administration stated that it would restrain the scale of bond issuance, signaling the sustainability of fiscal management.
The yield on 30-year Japanese government bonds rose to 4.235% at the time of reporting, heightening market vigilance against a backdrop of concerns over fiscal conditions. The government indicated that it would move to restrain the scale of bond issuance and respond swiftly to market volatility.
The Bank of Japan is moving away from its long-term monetary easing policy, raising rates in June and then lifting the policy rate to 1.25% in September, its highest level in the BOJ’s history. As concerns grow that the risk of widening fiscal deficits will increase debt-servicing costs, concern is mounting that funding costs for private investment will rise.
Former BOJ board member Noguchi Asahi (野口 あさひ) expressed the view that Japan no longer needs accommodative policies to stimulate aggregate demand and called for cautious policy management as a prerequisite for achieving the 2% inflation target. At the same time, he pointed out that market movements could make it difficult for the BOJ to continue tightening at a gradual pace.
The government is rushing to pass a proposal for a two-year cut in taxes on food products beginning next April, and has indicated that it will adjust borrowing levels based on tax revenue, interest-rate trends and debt-servicing costs. If the rise in long-term interest rates continues, policy options such as securing funding sources and reviewing the issuance structure could expand.