Japan’s government bond market hit a record low on Wednesday as demand for its 40-year bonds plummeted, sparking concerns that the country’s ultra-long debt is losing appeal to investors.
The sell-off comes after a month of heavy selling across Japan’s “super-long” bond market, with a disastrous 20-year auction last week being the worst since 2012. The Ministry of Finance has announced plans to scale back issuance of longer maturities in an attempt to calm the market, but analysts say investors remain skeptical about the long-term viability of Japanese debt.
The woes of Japan’s government bond market are mirroring those of other developed economies, including the US, which is also facing a surge in yields and dwindling demand for its long-term debt. The global market is on high alert as governments struggle to manage growing fiscal stress, with some analysts warning of a potential “Japan-led” debt spiral.
Inflation is rising while real wages are falling in Japan, leaving the country’s leaders boxed in. With debt-to-GDP at 260%, and the Bank of Japan owning more than half of outstanding Japanese government bonds, Tokyo is facing an unprecedented challenge to rein in its borrowing costs without triggering a recession.
The situation is being closely watched globally as investors grapple with the implications of Japan’s struggles on the broader market.
Source: https://qz.com/japanese-bonds-us-treasuries-global-bond-market-1851782636