Japan’s 40-year bond yield hits record 4% on election-linked fiscal concerns

Japan’s 40-year government bond yield climbed to a record 4% on Tuesday, as investors sold long-dated debt amid growing concerns over the country’s fiscal outlook following the announcement of a snap election.

The move came a day after Prime Minister Sanae Takaichi said she would dissolve parliament and hold a general election on February 8, placing fiscal policy at the centre of the campaign.

Yields on ultra-long Japanese government bonds rose more than five basis points, marking the highest level since the 40-year maturity was introduced. Shorter-dated bonds also sold off sharply. The benchmark 10-year yield rose above 2.3%, its highest level since 1999, while the 20-year yield climbed to around 3.35%.

Market participants cited concerns that proposed measures, including cuts to food sales taxes, could increase government spending and widen budget deficits at a time when Japan already carries the world’s highest public debt burden.

Analysts said the market reaction reflects a repricing of fiscal risk rather than a broader crisis. Some described the move as a revival of the so-called “Takaichi trade,” typically marked by rising equity prices, weaker government bonds and a softer yen.

Investors expect bond market volatility to persist in the near term as election campaigning intensifies, before stabilising once fiscal policy direction becomes clearer.