2026.01.2903:02:29UTC+00Japanese Yields Slip on Strong 40Y Auction

Japan's 10-year government bond yield decreased by approximately 5 basis points to 2.24% on Thursday. This decline followed a successful auction of 40-year government bonds that alleviated concerns surrounding Japan's fiscal outlook. This auction witnessed the highest demand since March of last year, bringing stability to the market following a significant selloff caused by Prime Minister Sanae Takaichi's proposal to temporarily remove the sales tax on food for two years. Investors also weighed the upcoming political dynamics with a snap election for the lower house scheduled for February 8. Initial polling suggests that Takaichi's ruling Liberal Democratic Party might increase its seats, potentially securing a majority. The prime minister initiated this election to consolidate power and further push expansionary fiscal measures. Additionally, minutes from the Bank of Japan's December meeting revealed that board members are supportive of continued rate hikes, provided economic and price trajectories align with their forecasts.