FX.co ★ Japan 10-Year Yield Slips Ahead of Elections

As of Thursday, Japan’s 10-year government bond yield adjusted slightly to approximately 2.23%, maintaining a stable range over the past two weeks. This stability comes as investors brace themselves for the upcoming lower house elections scheduled for this weekend. The ruling Liberal Democratic Party (LDP) under Prime Minister Sanae Takaichi is anticipated to secure additional seats, driven by her efforts to gain voter approval for enhanced spending and various policy measures. Since Prime Minister Takaichi assumed office, both Japanese bonds and the yen have experienced downward pressure due to her advocacy for expansionary fiscal strategies, which have stirred concerns regarding debt-funded expenditure and the nation’s fiscal health. In addition, investors are closely monitoring Japan's fourth-quarter GDP report, expected to show a recovery following a significant contraction in the previous quarter. Moreover, the recent 10-year bond auction this week reflected diminished demand amidst election-related uncertainties, yielding an average rate of 2.249%. This figure represents a notable increase from the 2.095% recorded at the preceding auction.