Japan's Tax Cut Plan Sparks Bond Yield Fears

Japan's government is set to finalize an outline for a consumption tax cut and payouts to households without detailing how to fund the measures. The move may keep alive market concerns over Japan's strained finances, which are already reflected in record-high bond yields.

The cabinet approval of the tax cut outline comes as global fiscal and inflation concerns have lifted the yield on Japan's benchmark 10-year government bonds (JGB) to a 30-year high of 3.025% on Tuesday.

Prime Minister Sanae Takaichi's ambitious spending plans, which include capping new government bond issuance around 40 trillion yen ($259 billion) for the fiscal 2027 budget, have triggered a bond sell-off and criticism from U.S. Treasury Secretary Scott Bessent.