Takaichi's Growth Strategy Faces Bond Yield Jitters

Japanese Prime Minister Sanae Takaichi's growth strategy is facing challenges as bond yields spike to their highest levels in 30 years. The yield on the benchmark 10-year Japanese government bond reached 3% for the first time since 1992, causing investors to worry about Japan's fiscal health under Takaichi's economic management.

Bond prices and yields move inversely, so higher bond yields mean more interest payments by the government. The Finance Ministry expects Japan's debt to rise to 1,145 trillion yen ($7.2 trillion) at the end of March 2027, with a 17.1% increase in debt-servicing costs to a record 36.64 trillion yen in the next fiscal year.

Economists are concerned that Takaichi's tax cut and investment plans may fail, leading to heftier government debt loads. Yuichi Kodama, chief economist at Meiji Yasuda Research Institute, said the market has become 'quite sensitive' about the outlook for fiscal policy, making it difficult for Takaichi to carry out bold fiscal spending.