Reports of planned bridging bonds to fund strategic investments spark concerns over Japan’s fiscal health and BOJ policy outlook.
Japanese government bond yields rose Thursday after reports the ruling Liberal Democratic Party plans to issue bridging bonds for investment funding. The 10-year JGB yield increased 3 basis points to 2.72%, nearly erasing the prior session’s decline, while the five-year yield gained 2 basis points to 1.950%.
The move follows a Nikkei report detailing a draft proposal for bridging bonds across 17 strategic areas. Analysts warned the plan could pressure the JGB market amid already elevated fiscal concerns. The two-year yield, sensitive to BOJ policy shifts, edged up 0.5 basis points to 1.385%.
Speculation of a Bank of Japan rate hike in June added to upward pressure on yields. Governor Ueda’s recent comments on persistent inflation risks reinforced expectations for tighter monetary policy, with service-sector inflation running at 3% in April.