HSBC Asset Management reports a significant increase in yields on long-dated Japanese government bonds (JGBs) as of January 2026. This surge is attributed to rising concerns regarding Japan's medium-term fiscal outlook, particularly with Prime Minister Sanae Takaichi's announcement of substantial spending plans ahead of the upcoming general election.

Rising yields signal fiscal unease

"A pick-up in yields on long-dated Japanese government bonds (JGBs) in January turned into a surge last week. It follows growing nervousness over Japan’s medium-term fiscal outlook, with PM Sanae Takaichi signalling big spending plans ahead of next month’s general election."

"Japan’s government debt to GDP ratio has declined in recent years – driven by higher tax revenues and the positive impact of nominal growth outpacing interest rates on government borrowing. Low coupon JGBs issued during the era of ultra-loose monetary policy will gradually be refinanced at higher rates, pushing up debt servicing costs."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)