Japan's bond market experiences chaotic selloff amid fiscal concerns

Investing.com -- Japan’s $7.6 trillion bond market suffered a severe selloff Tuesday, with long-dated yields surging to record highs as investors grew increasingly concerned about the country’s fiscal health.

What began as an ordinary trading day in Tokyo rapidly deteriorated into what market participants described as the most chaotic session in recent memory. The selloff intensified Tuesday afternoon, sending yields on some bonds to unprecedented levels.

The rout forced hedge funds to unwind losing positions and prompted life insurers to sell bonds.

Yields on 30-year and 40-year Japanese government bonds jumped more than 25 basis points, marking the largest single-day move since U.S. President Donald Trump’s Liberation Day tariffs disrupted global markets last year.

The benchmark 10-year yields have risen 16 basis points over two sessions and 25 basis points since election discussions began earlier this month. Thirty-year yields surged 38 basis points in just two days.

Market participants attributed the selloff to mounting concerns about Prime Minister Sanae Takaichi’s economic policies, which include tax cuts and increased spending. These plans have raised questions about the financial stability of one of the world’s most debt-burdened governments.

A tepid response to a 20-year debt auction earlier Tuesday added to the negative sentiment. While the weak auction alone might not have triggered such a dramatic selloff, it compounded worries about Takaichi’s proposed tax breaks, creating a self-reinforcing cycle of selling pressure.

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