From Ultra-Low to All-Time Highs: Japan’s Bond Market Signals Change

After three decades of ultra-low rates, Japan’s 30-year government bond yield has surged to a record 3.29%.

The shift follows the Liberal Democratic Party’s election of Sanae Takaichi as leader, a fiscal dove poised to become Japan’s first female prime minister.

Markets are already calling it the “Takaichi Trade.”

Her policy stance signals larger fiscal spending, a continued accommodative Bank of Japan, and a weaker yen to support growth.

The reaction was immediate:

• Nikkei 225 rose 4.8%, with cyclical and defence sectors leading gains.

• The yen weakened past ¥150 per dollar, and

• Long-dated Japanese bonds sold off, pushing yields sharply higher.

For investors, this development carries global significance. Japan has long been the anchor of low yields worldwide, providing a source of cheap funding through the yen carry trade. As Japanese yields rise, the cost of global capital increases, tightening financial conditions well beyond Tokyo.

Higher JGB yields may encourage repatriation of capital, pressure global bonds, and temper high-valuation equities, particularly in sectors sensitive to rising discount rates such as technology.

While the new administration’s ability to implement sweeping reflationary measures remains uncertain, the market is already adjusting to a world where Japan’s yield curve is no longer flat and volatility is being exported globally.

Market implications

Key indicators such as the yen’s exchange rate and global long-term bond yields will remain important barometers of market sentiment in the weeks ahead.

At Intrasia Wealth, we continue to monitor these dynamics closely, as Japan’s evolving policy stance has the potential to redefine global yield relationships and reshape the cost of capital. For investors, this reinforces the importance of diversified exposure across regions, sectors, and asset classes, as shifts in Japan’s bond market could reverberate through currencies, global fixed income, and equity valuations.