Japan bond market rattled as Takaichi tax cut pledge tests fiscal trust

Japan's bond market is in turmoil as Prime Minister Takaichi's pledge to suspend the food consumption tax raises questions about fiscal discipline. The 10-year JGB yield surged to a 27-year high, reflecting rising investor anxiety. The proposed tax suspension could cost approximately ¥5 trillion annually, exacerbating concerns over Japan's heavy public debt. Despite having technical options to stabilize the market, such as bond buybacks and trimming issuance, analysts argue these measures provide only temporary relief. With elections approaching, there is growing fear that fiscal prudence may be compromised for electoral gains, risking long-term credibility. Investors warn that volatility may persist unless the government presents a credible funding framework after the elections.