Japanese 10-year government bond yield rises 3 bps to 2.165%

Japanese 10-year government bond yield rises 3 bps to 2.165%

Japanese 10-Year Government Bond Yield Rises 3 Bps to 2.165%

The yield on Japan’s 10-year government bond (JGB) rose 3 basis points to 2.165% on February 25, 2026, reflecting ongoing market concerns about fiscal policy and debt sustainability amid political and economic shifts. The move follows Prime Minister Sanae Takaichi's historic victory in the snap lower-house election on February 8, which solidified her mandate to pursue expansionary fiscal measures, including tax cuts and increased public spending.

Takaichi's Liberal Democratic Party (LDP) secured a two-thirds supermajority, reinforcing expectations of looser fiscal policy and potential revisions to Japan's consumption tax, particularly on food. Analysts note that such measures, while aimed at boosting domestic demand, risk exacerbating Japan's already elevated debt burden, which stood at 229.6% of GDP as of late 2025. The yield on the 10-year JGB has surged from 2.12% in late 2025 to over 2.3% earlier this year, before stabilizing at current levels amid government assurances and potential Bank of Japan (BoJ) interventions.

The rise in JGB yields has broader implications for global markets. Japanese investors, historically major holders of U.S. Treasurys and European sovereign debt, may reallocate capital to domestic bonds as yields normalize. This shift could reduce demand for foreign bonds, potentially pushing yields higher in other developed markets. Meanwhile, the yen remains under pressure, with the Japan–U.S. yield differential narrowing as the BoJ continues its gradual policy normalization.

According to economists, sustained JGB yield increases could heighten Japan's debt servicing costs, which are projected to rise from 9% to 20%–25% of total government expenditure if refinancing occurs at current rates. While Takaichi's administration has emphasized fiscal prudence, the balance between stimulus and debt management remains a critical challenge.

Looking ahead, market attention will focus on the BoJ's upcoming policy meeting and potential measures to stabilize the JGB market, as well as the long-term impact of shifting Japanese capital flows on global bond dynamics.

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