Overview

• Yields on Japan’s 30- and 40-year government bonds surged to record highs this week as demand waned and the BOJ tapered purchases, with 40-year yields briefly reaching 3.32%.
• Wednesday’s 40-year bond auction drew the weakest demand since July, with the bid-to-cover ratio falling to its lowest level in almost a year.
• The Finance Ministry has opened consultations to potentially trim super-long bond issuance while keeping total annual debt targets unchanged at ¥172.3 trillion.
• The BOJ’s holdings of long-term government bonds declined for the first time since 2008, reflecting its ongoing taper and triggering valuation losses exceeding ¥28 trillion.
• Investors are awaiting the BOJ’s June policy meeting for guidance on future tapering against the backdrop of Japan’s 260% debt-to-GDP ratio and potential global market spillovers.