FX.co ★ Japan 10Y Yield Climbs Higher on Fiscal Worries

Japan's 10-year government bond yield surged past 1.8% on Thursday, reaching its highest point since 2008 as investors anticipated the unveiling of Prime Minister Sanae Takaichi's extensive stimulus package. This package is expected to surpass 20 trillion yen, and some lawmakers from the ruling Liberal Democratic Party have suggested a supplementary budget exceeding 25 trillion yen to finance the plan, significantly more than last year's 13.9-trillion-yen additional budget. This extensive expenditure has sparked concerns about Japan's fiscal stability, prompting a 'Sell Japan' sentiment that led to a decrease in the yen and bond prices, although stock markets remained steady, buoyed by Nvidia's robust earnings which alleviated fears of an AI market bubble. Concurrently, Bank of Japan Governor Kazuo Ueda informed the prime minister that the central bank is cautiously increasing interest rates to guide inflation towards its 2% target while promoting sustainable economic growth.