Japan’s 10-year government bond yield dropped to around 2.19% on Thursday, approaching one-month lows as optimism grew that Prime Minister Sanae Takaichi’s fiscal expansion plans will support economic growth without straining public finances. Yields had previously surged amid concerns over the country’s fiscal outlook, but market sentiment has eased on expectations that the risk of extreme debt scenarios is lower. Takaichi secured an overwhelming victory in the general elections last weekend, giving her a clear mandate to push for increased spending and tax cuts. She reaffirmed her plan to cut the 8% sales tax on food for two years, a move that had previously raised debt-funding concerns. Takaichi also stressed this week that the finance ministry will not issue new bonds to cover the spending gap. Instead, her administration plans to rely on a combination of subsidies, special tax measures, and non-tax revenues to fund initiatives in a “sustainable” manner.
