Japan's super-long bond yields jump on fiscal policy concerns

Japan's super-long dated government bond yields climbed sharply on Monday as concerns deepened over increasingly expansionary fiscal policy under Prime Minister Sanae Takaichi, pushing the 20-year Japanese government bond yield to its highest level in 26 years.

The 20-year JGB yield JBTC > rose 3.5 basis points to 2.750%, its highest level since August 1999.

The 30-year JGB yield rose 5 bps to 3.260%, its highest point since October 7. The 40-year JGB yield jumped 5 bps to 3.595%.


"We had data earlier today showing the nation's economy fell, which drove expectations that the government would increase spending to support growth," said Katsutoshi Inadome, a senior strategist at Sumitomo Mitsui Trust Asset Management. Japan's economy shrank almost 2% in the three-month period ended September, as a drop in exports in the face of U.S. tariffs resulted in the first contraction in six quarters, government data showed on Monday.

Over the weekend, the Nikkei newspaper reported Japan is considering spending around 17 trillion yen ($110 billion) in new Prime Minister Sanae Takaichi's first stimulus package.

"The amount in the report was within the market expectations. What investors care about now is that the spending could become more than that," said Inadome.

A long-time advocate of late Prime Minister Shinzo Abe's "Abenomics" stimulus policies, Takaichi has called for higher spending and low low-interest-rate policy, saying Japan still faces the risk of returning to deflation

The 30-year JGB yield started easing from a record high scaled early October after Takaichi took a seat of the prime minister, but it was on an upward trend this month as reports on the stimulus package started appearing on media.

The 10-year JGB yield rose 3 bps to 1.730%, its highest since June 2008.

The five-year yield rose 1 bp to 1.255%.

The two-year JGB yield rose 1 bp to 0.935%.

($1 = 154.6300 yen)