FX.co ★ Japan 10-Year Yield Falls as Election Looms

Japan's 10-year government bond yield fell to approximately 2.22% on Friday, marking a three-week low as investors braced for the upcoming lower house elections. Prime Minister Sanae Takaichi initiated the snap election to garner support for increased spending and possible tax reductions, with her ruling coalition widely predicted to secure a decisive victory. Markets responded with apprehension regarding how the government plans to finance its extensive spending proposals while mitigating potential revenue losses, which has generated uncertainty about Japan's fiscal future. Investors are also anticipating next week's Q4 GDP report, which is expected to show a recovery following the sharp downturn in the previous quarter. Additionally, this week's 10-year bond auction reflected cautious demand due to election uncertainties, yielding an average rate of 2.249%, compared to 2.095% at the previous auction.