Why Investors Are Worried About Japan’s Bond Market

Japanese bonds used to have such low yields that they acted as a kind of anchor for the global debt market, adding downward pressure on government borrowing costs the world over. No longer.

The yield on 40-year Japanese bonds rocketed above 4% in mid-January, a first for any maturity of the nation’s sovereign debt in more than three decades. One reason is that the Bank of Japan, which owns more than half of the nation’s sovereign notes, has begun to scale back bond purchases. Another is the possibility of additional government bond sales to fund Prime Minister Sanae Takaichi’s tax-cutting plans.